Home repossessions plunge but number of people in mortgage arrears increases

Home owner repossessions plunged by 88% in the third quarter of 2020 compared with the same period a year earlier, to just 160, according to a trade association.

But in signs of problems ahead, the number of home owners getting into severe arrears with their mortgage has been increasing.

UK Finance, which released the figures, also said that 230 mortgaged buy-to-let properties were repossessed in the third quarter – down 71% on the same quarter last year.

  • Home owner properties, 160

  • Buy-to-let, 230

The low figures reflect a temporary suspension of repossessions as part of measures to combat the coronavirus crisis.

UK Finance said the repossessions that did go ahead tended to be in cases where the customer had asked for their property to be repossessed or the home was vacant.

Since March, mortgage lenders have been offering mortgage payment holidays to home owners and buy-to-let landlords where Covid-19 has impacted their finances.

More than 2.6 million mortgage payment deferrals have been approved, with just under 140,000 still in place at the end of October.

As a result, mortgage arrears have remained low, UK Finance said.

Some 74,850 home owner mortgages were in arrears of 2.5% or more of the outstanding balance in the third quarter of 2020 – a 5% increase compared with the same quarter in 2019.

A total of 24,860 were in significant arrears of more than 10% – an 11% increase on the same period in 2019.

And 8,280 home owner mortgages were in arrears of 7.5% to 10% – a 15% increase.

UK Finance said cases of home owners in early arrears of less than 5% of the outstanding balance have declined in recent months as payment holidays have helped keep people on track.

It added that while later arrears of more than 7.5% have increased in 2020, new levels of these arrears remain significantly lower than in the past.

The figures also show that 5,400 buy-to-let mortgages were in arrears of 2.5% or more of the outstanding balance in the third quarter, up by 19% on a year earlier.

There was a 38% annual jump in the number of landlords in arrears of 5% to 7.5%.

UK Finance said mortgage arrears overall in 2020 remain close to the historically low levels seen in recent years.

Jonathan Harris, managing director of mortgage broker Forensic Property Finance, said it is important that borrowers taking mortgage payment deferrals realise that interest will continue to build up.

He added: “The uptick of buy-to-let mortgages in arrears is from a low base, with the overall picture suggesting current levels remain lower than in previous years.”

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: “Over the past year or so, lenders have been reluctant to enforce proceedings but mortgage holidays won’t last indefinitely and particularly if debts can’t be serviced.

“As a result, we are likely to see an increase in possessions, and for that matter arrears, as Government support falls away, which will inevitably have an impact on housing supply and will help to keep rising prices in check.”