The number of residential and buy-to-let mortgages in arrears continued to fall at the end of 2024, according to the latest UK Finance data.
The number of homeowner mortgages in arrears fell by 2% in Q4 2024 compared to the previous quarter and the number of buy-to-let mortgages in arrears fell by 3%.
UK Finance says the overall proportion of mortgages in arrears remains low, at 1.06% of homeowner mortgages and 0.65% of buy-to-let mortgages.
For comparison purposes, the number of homeowner and buy-to-let mortgages in arrears in Q1 2009, when arrears numbers peaked during the global financial crisis, was 209,600 – over twice the number currently in arrears.
In addition, the number of mortgages in early arrears fell in Q4, which suggests that any rise in total arrears in the next quarter will be limited. However, the decrease also partly reflects the fact that some customers who were previously in lighter arrears positions are moving into more serious arrears bands. The figures show a 9% year-on-year rise in the worst arrears band of 10% of more of the mortgage balance.
Possession numbers also increased over the quarter, but UK Finance stressed that overall numbers remain "significantly lower" than long-term averages.
A total of 1,730 homeowner and buy-to-let mortgaged properties were repossessed in Q4 2024, which is 87% lower than the 13,200 seen in Q1 2009 and 13% lower than the 1,990 seen in Q4 2019, before the pandemic.
Charles Roe, director of mortgages at UK Finance, said: “The number of mortgages in arrears has seen a slight decrease compared to the previous quarter. Having peaked in Q1 2023, arrears appear to now be on a confirmed downward trend. This reflects the fact that, while pressures remain, the challenges of higher interest rates and cost of living increases have begun to ease.
“This is good news for customers, but we know that this will not be the case across all households, and lenders will support anyone who might be struggling."
Melanie Spencer sales and growth lead at Target Group, commented: “Last quarter, the volume of arrears cases was falling and they’re still going in the right direction. With the UK set for a series of base rate cuts this year, borrowing pressures should ease. Increased government spending announced at the October budget should also drive growth supporting borrowers. Theoretically, cases should reduce.
“But we need to temper than with the news from the wider economy. RICS says housebuilders are doing less work than they were a few months ago. And the UK private sector economy expanded more slowly in last month as businesses laid off staff at the quickest rate since the 2008 global financial crisis. Rising unemployment will inevitably mean owner-occupiers and getting into arrears. Landlords aren’t immune from these shocks either – this week Grainger reported rents are rising at almost half the pace they were this time last year.
“This all points to borrowers needing more support from lenders. They will need the right systems in place to manage this process proactively, provide a much-needed resolutions for cases, and fall back on possessions only as a last resort. Early contact and remediation is essential to improve outcomes for all parties.”
David Miller, divisional director at Spicerhaart Corporate Sales, added: “We can be really encouraged by the fact that the number of arrears cases is decreasing, both on a quarterly and annual basis. While this is true for the lower arrears bands, numbers in the highest arrears band only continues to grow, which is likely to contribute to the rise in possessions. While perhaps with fewer options in terms of refinancing, they are certainly the ones that need the greatest support from lenders.
“Given the FCA’s recent communications with mortgage intermediaries, it’s abundantly clear that Consumer Duty remains their priority, along with minimising potential harm and poor outcomes – particularly for vulnerable customers. With all of financial services facing this same remit, it’s never been more important for lenders to have options in place to support clients in difficulty and deliver positive outcomes, with an assisted sale scheme being a clear example.
“As demonstrated in today’s figures with possessions still making up a small proportion of cases, lenders continue to do all they can to ensure that this is the last resort that it should be. We’re definitely seeing all the hard work of lenders helping customers that accept support and that is demonstrated in today’s figures. Part of this comes from robust forbearance measures, as well as the availability of good technology and intelligence, and the right partners in the market to help build a proactive strategy to support clients in difficulty and assess the value and any potential risk found in a lender’s portfolio.”
