The third quarter of this year saw 1% fewer homeowner mortgages in arrears than in Q2, show new figures from UK Finance.

In total, there were 74,440 homeowner mortgages in arrears of 2.5% or more at last count.

And of these, 28,910 were in ‘significant’ arrears – defined as being 10% or more of the outstanding balance. UK Finance reports this figure as being unchanged on the quarter.

However, during this time frame, 700 homeowner properties were taken into possession, which is a 15% rise on Q2.

Regarding the buy-to-let (BTL) space, UK Finance notes 5,760 mortgages in arrears or 2.5% or more, which is a 2% increase on the quarter. A total of 1,780 of these were significant – a 1% drop by this metric.

As with homeowner properties, there was a major rise in BTL properties being taken into possession n Q3 – 11% up to 390.

Phoebus Software chief sales and marketing officer Richard Pike says: “Although the figures show very little change from the previous quarter the underlying number with more significant arrears is the figure that lenders should be watching.

“Forbearance during, and since, Covid has meant that lenders have had to change their processes and as such allow more significant arrears to build. With inflation and interest rates rising it is only right to expect that the number of borrowers in arrears is going to increase.

“Unfortunately, during the period of forbearance, lenders didn’t have the need for large teams to deal with arrears. As things change it will be vital for lenders to ready themselves and get the infrastructure in place to deal with an inevitable rise in arrears.

“It will also be incumbent on lenders to manage borrowers and ensure that arrears don’t build up to an unhealthy level, otherwise repossessions too may rise.”