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Mortgage arrears remain low as payment holidays come to an end

Mortgage arrears remain close to historically low levels due to the mitigating effects of payment deferrals and other tailored forbearance, according to the latest figures from UK Finance.

Q2 saw 26,560 homeowner mortgages in early arrears (those between 2.5% and 5% of balance in arrears), down 5% on Q1.

Some 27,910 homeowner mortgages had more significant arrears (10% or more of the outstanding balance), an increase of 630 on the previous quarter.

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210 homeowner mortgaged properties and 230 buy-to-let mortgaged properties were taken into possession in the second quarter of 2021.

Steve Seal said: “While it’s encouraging to see mortgage arrears remain close to historic lows, the picture could look very different in the coming months. Mortgage payment holidays have now come to an end, and with furlough and the Self-Employment Income Support Scheme set to end in September, there’s likely to be more homeowners who will struggle to keep up with mortgage repayments.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

“This may only be short-term for some borrowers, however it is something that could impact their credit profile in the long-run. As a result, many of these customers risk being turned away from highstreet lenders and may not know where else to turn. This is where the specialist lending market has an increasingly important role to play.

“As an industry, it is our responsibility to support this cohort of customers which is only set to grow post-pandemic, signposting them to the options available and highlighting how the specialist market can cater to their unique needs.”

Source: Mortgage Introducer

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Mortgage arrears fall by 6% year-on-year

The mortgage arrears and possessions figures from UK Finance for the first quarter of 2020 show a year-on-year decrease but there was a relatively small rise in arrears compared to Q4 2019.

There were 72,380 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of 2020, 6% fewer than in the same quarter of the previous year.

Within that total, there were 22,050 homeowner mortgages with more significant arrears (representing 10% or more of the outstanding balance). This was also 6% down on the same quarter last year.

Buy-to-let

The number of buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of this year was 4,420 – again 6% fewer than in the same quarter in 2019.

Within this, 1,170 buy-to-let mortgages had more significant arrears and this was 3% lower than in the same quarter the year before.

Arrears rise on previous quarter

Comparing the Q1 2020 figures to the previous quarter of Q4 2019, homeowner mortgages in arrears rose 2% from 70,880 while buy-to-let arrears increased marginally from 4,390.

This is likely due to the early effects of Covid-19, and the industry has since introduced multiple forbearance measures to reduce financial difficulties for borrowers who are in need of support. The level of arrears remain low by historical comparisons.

Callum Bilbe, analyst, data & research at UK Finance, explained: “While we did see a modest increase in arrears from Q4 2019 to Q1 2020 (the vast majority of which were new arrears in March), this rise relates to the very earliest effects of the Covid-19 outbreak at the start of March, with the payment holiday scheme being introduced shortly after this, helping to prevent further payment issues for borrowers who might be struggling.”

Repossessions

The first quarter of 2020 saw 1,070 homeowner mortgaged properties taken into possession, 23% fewer than in the same quarter of the previous year.

Buy-to-let mortgaged properties taken into possession stood at 640 in Q1 2020 this represents a rise of 8% on the same quarter last year.

Second charge mortgage repossession numbers in Q1 2020 fell to 13, according to the Finance & Leasing Association (FLA). This is down from 24 or 45.8% compared to Q1 2019.

Fiona Hoyle, head of consumer and mortgage finance at the FLA, commented: “The rate of second charge repossessions remains very low – just 0.06% in the twelve months to March 2020, and in line with FCA guidance, repossessions have not been taking place during the Coronavirus period.”

Commenting on the UK Finance figures, Jackie Bennett, UK Finance senior advisor, mortgages, commented: “While the number of mortgages in arrears are down 6% year-on-year for both homeowners and landlords, and the number of possessions down 23% for homeowners, lenders know that coronavirus is currently causing financial difficulty for many customers.

“That’s why the banking and finance industry is working hard to support people during this difficult time, including providing more than 1.6 million mortgage payment holidays and introducing a three-month moratorium on any possessions.”

More arrears in the pipeline

Meanwhile, solicitors Parker Bullen has suggested that 1% of borrowers could default on their loans due to redundancies.

Mark Lello, partner at Parker Bullen, said: “We’re concerned that borrowers, brokers and lenders are not acknowledging the elephant in the room. When the government furlough scheme comes to an end, which it inevitably will for all sectors, early indications suggest we could see 1% or more of workers being made redundant.

“With a dearth of new jobs to go to, people who have been used to years of secure employment could find it very hard to find work in the short term. To aid recovery, many businesses will have to adapt and evolve their operating models. This may include closing business premises, having fewer support staff or making roles that have proved non-essential during lockdown redundant.

“We’re therefore advising brokers and lenders to plan for the worst and prepare for defaults that may occur over the coming months.”

By Joanne Atkin

Source: Mortgage Finance Gazette

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Mortgage arrears fall to record low

Mortgage arrears hit record lows in the first quarter of this year, figures from mortgage trade body UK Finance have revealed.

The figures showed there were 7,800 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance in the first quarter, 8 per cent fewer than in the same period of the previous year.

This is the lowest level since records began.

A total of 24,100 people had mortgages with more significant arrears, of 10 per cent or more of the outstanding balance, which is 3 per cent fewer than the previous year.

There were 4,500 buy-to-let mortgages in arrears of 2.5 per cent or more, and 1,100 of them had arrears of 10 per cent or more.

This represented a 6 per cent drop from the previous year.

Despite this fall, the number of homes that were repossessed remained the same, with 1,200 homeowner mortgage properties taken into possession.

Jackie Bennett, director of mortgages at UK Finance, said that while the figures were good, arrears and repossessions could increase due to the change to Support for Mortgage Interest (SMI), which has become a loan rather than a benefit.

Ms Bennett said: “Only a small minority of those eligible for the SMI loan have taken it up so far.

“Lenders will proactively help borrowers in receipt of Support for Mortgage Interest (SMI) to see if there are other ways to make up their payments if they do not want to take out the loan.

“As ever, customers should not hesitate to contact their lender if they anticipate any payment problems and want to discuss what options are available. Repossession is always a last resort.”

Jonathan Harris, director of mortgage broker Anderson Harris, warned that there was “no room for complacency” following the figures.

He said: “Borrowers need to be prepared. We suspect that when it comes to their finances there are many people who don’t have a buffer to tide them over should they get into difficulty.

“Borrowers must plan ahead and consider how they will cope if interest rates rise. Fixed rate mortgages are still great value and remain competitively priced. It is also vital that borrowers keep their lender in the loop if they are struggling to pay their mortgage.

“Lenders are being flexible and showing forbearance but it is much easier and less stressful to come up with solutions early on than further down the line when options may be much more limited.”

Jeremy Leaf, north London estate agent and a former Rics residential chairman, said: “These figures are interesting because they show a housing market which, although softening, is unlikely to collapse anytime soon, despite all the gloom and doom we have seen over the past few days in Halifax and Rics data.

“One of the precursors of a more significant correction in property prices is more forced sales and clearly we are not seeing, or likely to see, that at the moment, particularly while mortgage rates are so low, wages are actually creeping up ahead of inflation and employment numbers remain strong.”

Source: FT Adviser