Home owner mortgage arrears at record low, UK Finance says

The number of home owners in arrears with their mortgage fell to a record low in the first three months of 2018, lenders have reported.

Across the UK, there were 78,800 home owner mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of 2018, 8% down on a year earlier and the lowest level since records started in 1994, according to trade association UK Finance.

This is despite the Bank of England base rate having edged up from 0.25% to 0.5% last year, pushing up costs immediately for some people on a variable rate deal.

UK Finance also warned that a recent change to support for mortgage interest (SMI) - turning it from a benefit to a loan - could potentially reverse the downward trend in the number of borrowers struggling with their mortgage payments in the coming months.

Within UK Finance's total, the number of mortgages in the most severe arrears bracket also fell.

There were 24,100 home owner mortgages equating to 10% or more of the outstanding balance.

This was 3% down on the same quarter of the previous year.

UK Finance said there were 4,500 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of 2018 - a 6% decrease compared with the same quarter of the previous year.

Meanwhile, 1,200 home owner mortgaged properties were repossessed in the first quarter of 2018 - a figure which was unchanged from the same quarter of the previous year.

And 700 buy-to-let mortgaged properties were repossessed - also unchanged from the same quarter last year.

Jackie Bennett, director of mortgages at UK Finance, said: "The number of mortgages in arrears is at its lowest level since records began while possessions remain at a historic low.

"This has been helped by low interest rates and lenders supporting borrowers through periods of temporary financial difficulty wherever possible."

But she said the recent change to SMI from a benefit to a loan, as well as potential pressure on households from a future base rate rise, risk causing a reversal of this trend as the year goes on.

People who qualify for SMI, which gives them help to pay the interest on their home loan, are usually receiving certain benefits.

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 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, said the arrears figures were encouraging but warned there was no room for complacency.

"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," he said.

"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."

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