The latest report from UK Finance reveals a significant increase in the number of buy-to-let mortgages in arrears during the third quarter of this year. The figures show a 29% rise in arrears, with 11,540 BTL mortgages accounting for 0.57% of all outstanding BTL mortgages. This surge is attributed to the combined impact of rising living costs and higher interest rates, particularly affecting landlords who are unable to raise rents to cover their increased outgoings.
Homeowners also faced a 7% increase in arrears during Q3, with 87,930 borrowers falling behind on mortgage payments, making up 1% of all outstanding residential properties with a mortgage.
Despite the quarter-on-quarter increase, it’s important to note the comparison with Q3 2009, when the number of BTL and residential mortgage borrowers in arrears stood at 207,200, over twice the combined figure last quarter. This reflects the positive impact of lender stress tests, ensuring borrowers can keep up with their mortgage payments even if interest rates rise above those in place when they first took out their mortgages.
The report also highlights that 630 homeowner mortgaged properties were taken into possession in the third quarter, 9% fewer than in the previous quarter. Similarly, 450 BTL mortgaged properties were taken into possession during the same period, unchanged from Q2 2023.
Commenting on the increase in arrears, UK Finance emphasises the increased forbearance that lenders are showing to struggling borrowers. The organization points out that the ultra-low interest environment of recent years has led to a level of complacency, and the rising cost of living and higher interest rates has come as a massive shock to many. Lenders are keen to avoid repossessing homes, as it is expensive, upsetting, and disruptive, and will continue to do everything they can to prevent more homes from being taken into possession in the coming months.
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