A slight annual increase in mortgage arrears was seen in Q1 of 2021, but levels remain close to historically low rates, according to the latest data from UK Finance.
The number rose by 230 in the first quarter to a total of 77,640 homeowners with mortgage arrears of 2.5% or more.
Within the total, there were 28,100 homeowner mortgages in early arrears, between 2.5% and 5% of balance in arrears, a decrease of 1% on the previous quarter.
UK Finance says the low number of arrears is a direct result of payment deferrals and other tailored forbearance.
From March 2020 to 31 March 2021, lenders offered payment deferrals of up to six months to customers and buy-to-let landlords where Covid-19 had impacted their ability to meet their monthly mortgage payments, with almost 2.9 million granted while the scheme was active.
UK Finance managing director of personal finance Eric Leenders says: While there was a slight rise in total arrears in Q1 2021 compared to the historic low levels seen before the pandemic, the additional support from lenders has helped many mortgage customers stay out of arrears.
“With the economic impact of Covid-19 continuing to be felt, we anticipate there will be further increases in mortgage arrears during 2021. Any customer who is concerned about their finances should contact their lender early to discuss the options and tailored support available to them.”
Masthaven Bank chief lending officer David Kennedy says: “The various initiatives put in place last year to bolster the economy, have certainly boosted the housing market and injected it with vitality, but the government has clearly signalled that these won’t go on forever. Once important measures such as furlough run dry, then it’s crucial that customers aren’t left rudderless. For a large number of borrowers, the pandemic may be the first time they have seen such a serious hit to their finances and some may be embarrassed to ask for help or guidance. Lenders need to be ready to be proactive to ensure there is no spike in arrears later this year.
“Making regular contact with vulnerable customers now, will help identify and prevent problems down the line and lenders need to ensure that they are educating their customers on the support that’s available to them. Specialist lenders have always prided themselves on being able to provide a personal touch and a more individual approach to their customers, which has been borne out over the last year. The industry may have passed the initial tests posed by the pandemic, but there will certainly still be challenges to come.”
