Number of home-owners falling into mortgage arrears expected to increase in 2021
The number of home-owners getting into difficulty with their mortgage payments is expected to increase this year as further economic impacts from the coronavirus pandemic hit, lenders have said.
Some 77,410 home-owner mortgages were in arrears of 2.5% or more of the outstanding balance in the fourth quarter of 2020, marking an increase of 2,560 on the previous quarter, according to trade association UK Finance.
Within the total, there was an increase in borrowers in early arrears equating to 2.5% to 5% of the mortgage balance, when compared with the previous quarter.
As a direct result of payment deferrals and other tailored forbearance, mortgage arrears levels in 2020 remain near to the historically low levels that we have seen in the last three years, according to our latest Arrears and Possessions figures here > https://t.co/5taySXH7BZ pic.twitter.com/XXm5CSp7tD
— UK Finance (@UKFtweets) February 11, 2021
While the number of borrowers in early arrears has increased, it is still lower than the number of cases before the coronavirus pandemic started, the report said.
It added: “We anticipate that the number of early arrears will increase further once the furlough scheme ends and the economic impacts of the pandemic are realised.”
There was also an increase in cases involving more significant arrears, equating to 10% or more of the outstanding balance, compared with the previous quarter.
UK Finance said this increase was largely driven by customers who had several missed payments before the pandemic.
Eric Leenders, managing director of personal finance at UK Finance, said: “Despite the modest uptick, the total number of customers in the early stages of arrears in quarter four 2020 remains below the level seen at the end of 2019.
“As Covid-19 continues to affect the economy, we anticipate there will be further increases in mortgage arrears during 2021.
“Lenders continue to help customers experiencing financial difficulties with a package of support for those who need it, including payment deferrals and tailored assistance.”
Eric Leenders, MD of Personal Finance at UK Finance, said: "The support available from lenders has meant those who were not in financial difficulty at the beginning of the pandemic have remained out of arrears." https://t.co/5taySXH7BZ pic.twitter.com/LEsYY6I363
— UK Finance (@UKFtweets) February 11, 2021
Only 140 home owner-mortgaged homes and 190 buy-to-let properties mortgaged by landlords were repossessed in the fourth quarter of 2020.
An industry ban on involuntary repossessions remains in place until April 1 2021.
The report said the low repossessions numbers “for the most part reflect cases where the customer requested the possession to go ahead or where the property was vacant”.
But it warned that repossessions “will increase in 2021 driven by the backlog that did not occur in 2020 due to the possessions moratorium, almost all of which will have been in train before the pandemic”.
It said lenders continue to show flexibility to borrowers in financial difficulty, and repossession is always a last resort.
