Rising Mortgage Arrears Among UK Homeowners, New Research Shows

Recent research from LandlordBuyer has identified that in the first quarter of 2024, 96,580 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance. This represents a 3 per cent increase from the previous quarter. Of these, 13,570 were buy-to-let mortgages in arrears.

The data also indicates that 870 homeowner mortgaged properties were taken into possession in the first quarter of 2024 – a 36 per cent increase from the previous quarter. Additionally, 600 buy-to-let mortgaged properties were taken into possession during the same period – a 20 per cent increase from the previous quarter.

LandlordBuyer Managing Director, Jason Harris-Cohen, stated: “The impact of the cost of living on mortgage repayment affordability can’t be ignored. Although inflation has dropped to 2.3%, consumers are still reeling from its peak of 11.1% in October 2022. We also need to bear in mind that the price of goods, fuel and utilities are still rising – just at a slower rate.

“When you overlay inflation with mortgage rates, it isn’t a pretty picture. Borrowers are now resigned to the fact that home loans with 2% interest are a thing of the past and that rates of between 4-5% are the new normal. It has been especially painful for borrowers coming off fixed-rate deals. For many, their repayments doubled overnight – whether they went on the lender’s SVR or remortgaged to a new deal.

“For landlords, it has been a struggle to find a logical balance between effort in and profit out. Running a buy-to-let has never been more involved, with complex compliance and strengthening tenants’ rights. This is in tandem with zero mortgage interest tax relief, increasing running costs and arrears that have risen 24% in the year to April 2024.

“Jason explained that the number of owner-occupiers and buy-to-let borrowers who have fallen behind with mortgage repayments has been pretty much static since the start of 2021.

He added: “It’s a repeat story. Rent rises are outpacing wage growth, fuelling arrears, but rising mortgage costs are wiping out any profit a landlord may make. This has left many buy-to-let owners in the perilous situation of falling behind with mortgage repayments. In the worst cases, there is no other option but to surrender the property to the lender.

“As for the future, there was a glimmer of optimism that mortgage rates may dip below 4% during the remainder of 2024 but swap rates became more volatile and there has been flip flopping between small rate increases and decreases but nothing that would send borrowers rushing to the bank. We’re now watching what the run up to the General Election does to mortgage rates but we expect the full impact to take hold after 4th July.”