The number of buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance has soared by 29% to reach 11.540 between the start of June and end of September, according to UK Finance.
Meanwhile, residential mortgages in arrears by the same amount increased by 7% to 87,930, in the same period – Q3 of 2023.
Whilst actual repossessions of properties has fallen by 18% during this time, the number of homeowners facing the threat of possession has increased.
Charlotte Nixon, mortgage expert at Quilter, explained possession claims, which are initial filings by lenders to obtain court permission to foreclose on properties, increased by 14% to 4,185.
She said this uptick was a clear signal of the rising financial pressure on homeowners. And she said the fact mortgage possession orders – the court’s judgment that lenders may proceed with foreclosure – had risen by 18% to 2,923, underscored the gravity of the situation for those struggling to pay their mortgages.
But with more landlords also falling into arrears as well as facing possession claims, the outlook also looks bleak for renters.
Nixon said: “These numbers are not just statistics; they represent individuals and families grappling with the possibility of losing their homes amidst the crunch of higher rents and higher bills.
“These figures represent the heightened financial distress that is becoming increasingly widespread across regions, with possession claims rising in every area. London stands out with the highest rates of both private and social landlord claims, a testament to the acute cost pressures in the capital.”
Landlords facing rising costs
UK Finance attributed to rise in landlord arrears to rising mortgage costs, which meant those with buy-to-let mortgages had been unable to raise the rents to cover the increased payments.
The data showed as many as 11,540 buy-to-let mortgages were in arrears of 2.5% or more of the outstanding balance. Meanwhile there were 6,270 buy-to-let mortgages in ‘light’ arrears of between 2.5% and 5% of the outstanding balance – this is a 33% increase.
Ranald Mitchell, director at Norwich-based Charwin Private Clients, said: “There is so much pressure on landlords as arrears increase and tenants struggle to make rent payments.
“Many of those affected will not be portfolio landlords, just normal people who aspire to build wealth through property. They rely on rent to cover the mortgage payments and will not have the personal resources to cope.”
What to do if you are falling behind with your mortgage payments
If you are a landlord, or a residential homeowner, and you are concerned about falling behind with your payments there is support available thanks to the Mortgage Charter.
It’s a pledge signed by 48 UK lenders (90% of the market) committing to offering practical options for customers who are unable to meet repayments. These can include switching to interest-only payments for six months, for example.
They may also give customers approaching the end of a fixed-rate mortgage the chance to lock in a deal and request a better like-for-like deal if rates change up to six months ahead. There is also a guarantee of no possession within 12 months of your first missed payment.
Eric Leenders, managing director of personal finance at UK Finance, said, “Anyone worried about making their mortgage payments should contact their bank as soon as they can.
“All lenders have teams of experts ready to help anyone struggling with their mortgage payments with tailored support. The sooner you get in touch, the more support options your lender will be able to offer.
“What’s more, reaching out to your bank to find out what support is available won’t affect your credit score.”
Sarah Pennells, consumer finance specialist at Royal London, also highlighted how important it was to reach out for help as early as possible.
“It is much better to have the conversation with your lender early so they can look at available support options with you before you find yourself with any mortgage arrears,” she said.
“Contacting them before you miss payments means there may be more options available to you to help make your payments affordable.”
