Mortgage arrears rise in Q1

Figures from UK Finance released today show that within the total number of borrowers in arrears, 27,700 of the mortgages were in the lightest arrears band, which represents arrears of 2.5% to 5% of the outstanding balance - an increase of 5% on the previous quarter.

Buy-to-let mortgages saw a greater rise, with 16% more borrowers in arrears (7,030 mortgages) than the previous quarter.

A total of 750 mortgaged properties were taken into possession in the first three months of the year, a 50% increase on Q4 2022, while 410 buy-to-let properties were repossessed - 28% higher than the previous quarter.

UK Finance say the figures 'should not be a cause for panic' and that lenders are 'proactively supporting' borrowers who were concerned about their finances, including nearly 200,000 borrowers in the last year who were given tailored forbearance.

Commenting, Adam Oldfield, chief revenue officer at Phoebus Software, said:

“Having been in a low interest environment for such a long time the recent increases in interest rates have put many borrowers into a position they have never experienced before. The figures from UK Finance this morning bear out the fact that increasing interest rates coupled with the rising cost of living is taking its toll. Unfortunately, with around 370,000 borrowers coming off fixed rate deals between April and June (ONS), the likelihood is that this trend will continue and is almost certainly going to get worse. This is especially true if, as many expect, the Bank of England continues to put the base rate up.

“Once again there will be a great responsibility for lenders to identify borrowers that may be getting into difficulty and manage the situation with care. With Consumer Duty rules coming into force at the end of July that responsibility becomes more onerous, and every lender will need to ensure they have all their systems aligned to ensure the best outcomes for their borrowers.”