Payment Holidays Prevent Rising Mortage Possessions

Homeowner mortgages in arrears increased slightly between the final quarter of 2019 and the opening quarter of 2020.

There were 72,380 homeowner mortgages in arrears of more than 2.5 per cent in the opening quarter of the year according to UK Finance.

This figure represented a 6 per cent fall in mortgage arrears from the same time a year earlier but a 2.1 per cent increase on the historically low mortgage arears figure of 70,880 in Q4 of 2019.

Of the total figure, 22,050 mortgages were in arrears of more than 10 per cent of their loan. Whilst this represented a 6 per cent reduction from the opening quarter of last year, the figure was a marginal rise on the 21,770 mortgages in serious arrears in Q4 2019.

4,420 buy-to-let mortgages were in arrears of more than 2.5 per cent whilst 1,170 owed more than 10 per cent. Again, these figures had reduced on an annual basis but had climbed slightly from the number of arrears at the end of 2019.

1,070 homeowner mortgages and 640 buy-to-let mortgages were taken into possession. For homeowner mortgages, this figure represented a fall in the number of possessions from 1,330 in the final quarter of 2019 and a 23 per cent fall from the opening quarter of 2019.

UK Finance attribute the rise in arrears to the early stages of Covid-19 putting financial strain on home owners. However mortgage payment holiday options could also be responsible for fewer properties being taken into possession in the early stages of the year.

Jackie Bennett, UK Finance Senior Advisor, Mortgages, said:

“While the number of mortgages in arrears are down six per cent year-on-year for both homeowners and landlords, and the number of possessions down 23 per cent 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.”

Dave Miller, client account manager at Spicerhaart Corporate Sales, commented:

“The modest rise in arrears from Q4, an increase of just over 2%, can be attributed to the early impact of Covid-19, as homeowners’ income began to be affected by a fall-off in economic activity.

“As UK Finance themselves point out, mortgage payment holidays were introduced shortly after this, and this should enable most borrowers to avoid getting into serious difficulties. The Government’s furlough scheme will also be of benefit in this respect.

“There remains a serious issue for the more than 22,000 homeowners with arrears of 10% of their mortgage balance or more – a number that had been gradually falling before Covid-19 struck but still highly significant for the individuals and families involved. Although they will benefit in the short run from the cessation of possessions activity, the longer it goes on, the worse their position becomes.

“Most of those borrowers are unlikely to be in a better position to address those arrears after the payment holiday is ended, and both lenders and the Government need to think through what the best approach is to helping people in that situation.”

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