Mortgage arrears fell by 3.1% to 74,210 in the third quarter of the year, as government pandemic support for household incomes remained in place until the end of September.
There were 2400 fewer mortgages in arrears of 2.5 per cent or more of the outstanding balance, as households were able to draw on the Coronavirus Job Retention Scheme (CJRS), according to data from UK Finance.
The banking body says this level of arrears are “near historic lows”.
Between March 2020 to September 2021, the CJRS covered up to 80 per cent of the wages for as many as 11.7 million employees who had been furloughed due to Covid-19, with reductions in the percentage paid during the final few months.
The association adds that almost 3 million Covid-19 payment deferrals were granted by mortgage lenders between March 2020 and March 2021, “providing borrowers with additional help in managing their household finances through the crisis”.
Within the total mortgage arrears cases, there were 27,980 homeowner mortgages with more significant arrears, representing 10 per cent or more of the outstanding balance, 70 more cases than the previous quarter.
For buy-to-let properties, a total of 5,670 of these mortgages were in arrears of 2.5% or more of the outstanding balance in the period, a 6% fall compared with the previous quarter.
There were 410 homeowner mortgaged properties and 320 buy-to-let mortgaged properties taken into possession in the period.
The trade body adds: “It is important to note that year-on-year comparisons will look unusually large due to the possession moratorium from March 2020 to 1 April 2021, over which period no enforced possessions took place.
“In absolute terms, there were 290 more possessions cases compared with the second quarter of 2021. The number of possessions is expected to gradually increase as the courts continue to work through the backlog of cases accumulated over the moratorium period.
“These borrowers would have been in financial difficulty prior to the pandemic.”
Masthaven chief lending officer David Kennedy says: “While levels of mortgage arrears and possessions remained low up until the end of September, there is no room for complacency.”
“The end of furlough at the start of October could prove a large financial blow to many struggling borrowers.
“Rising inflation, fuel shortages and further supply chain disruption have also hit borrowers financially.
“These Covid-related supply chain issues, as well as shortages in labour, key technology like microchips, and raw materials are expected to continue into the next year further pushing up inflation.
“The Bank of England has yet to increase its base rate, but higher levels of inflation could force its hand.
“Even the smallest of rate rises may end up tipping borrowers over the edge, especially those who have low levels of financial resiliency post-Covid. At the same time, house prices continue to rise, potentially causing further affordability issues for would-be buyers.”
MPowered Mortgages distribution director Emma Hollingworth adds: “The long-term impact of the pandemic may not yet be visible and there remains a number of borrowers who faced financial difficulty pre-pandemic who have continued to build up arrears through the crisis.
“Lenders will now play a vital role in supporting its customers and will need to be proactive in order to avoid a sudden jump in arrears as we enter the final months of the year, especially now that government support has tailed off.
UK Finance managing director of personal finance Eric Leenders says: “Mortgage arrears continued to fall to near historic lows during the third quarter of the year, with the furlough scheme and the previous mortgage payment deferral scheme supporting people and even enabling some to pay down existing arrears.”
