There were still 140,000 mortgage payment deferrals in place in October, with lenders continuing to offer support to customers whose ability to repay their home loan has been affected by the Covid-19 pandemic. 

Figures from UK Finance shows this is a relatively small proportion of the 2.6m payment deferrals that have been approved since that start of March. 

However these latest figures do not yet cover the second national lockdown, which may see more homeowners seeking this additional help. 

UK Finance says these deferrals are helping to keep mortgage arrears at a relatively low level. 

Its figures for the third quarter of 2020 show a total of 74,850 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance.

Although this is a five per cent increase on figures for the same quarter last year, UK Finance says that overall arrears remain close to the historical low levels seen over the last three years. 

Within this figure there there 24,860 homeowners who were in arrears by 10 per cent or more of the outstanding balance. 

UK Finance says while there has been some increase in these ‘later’ arrears (where arrears are more than 7.5 per cent of the mortgage balance), the number of homeowners mortgage in arrears by less than 5 per cent of the mortgage balance declined in the third quarter. This it says is due to these deferral options, which have helped people keep up to date with mortgage payments. 

In the buy-to-let sector there has been a sharper increase in arrears, with 5,400 BTL mortgages in arrears by 2.5 per cent or more of the outstanding balance in the third quarter of 2020. This is a 19 per cent increase on the same period in 2019. 

Within this total there were 1,350 BTL with more significant arrears. 

However UK Finance points out that this increase is from a very low base, with current levels still remaining lower than in previous years. 

In total over this quarter just 160 homeowner mortgage properties were repossessed. This is 88 per cent lower than number in Q3 2019. 

It is a similar picture in the BTL mortgage market, with 230 properties taken into possession, a decline of 71 per cent on the previous year’s figures.

Forensic Property Finance managing director Jonathan Harris says: “The number of homeowners in arrears remains close to historically low levels, which is not surprising as many borrowers continue to take advantage of mortgage payment deferrals. 

“However, it is important that borrowers appreciate that it is not a payment holiday and that interest will continue to rack up, so it should only be taken if really required.

“The uptick of buy-to-let mortgages in arrears is from a low base, with the overall picture suggesting current levels remain lower than in previous years. The past few months have been difficult for landlords, however, with evictions put on hold, many may be tempted to sell up once they have an opportunity to do so.”

North London estate agent and a former RICS residential chairman, Jeremy Leaf, adds: “Mortgage arrears and possessions are always a key indicator of market strength as many will not be activated unless lenders believe there is a good chance of selling. 

“Over the past year or so, lenders have been reluctant to enforce proceedings but mortgage holidays won’t last indefinitely.

“As a result, we are likely to see an increase in possessions and for that matter arrears as government support falls away, which will inevitably have an impact on housing supply and will help to keep rising prices in check.”