More than 700,000 borrowers have found it difficult to keep up with mortgage payments in the past year, according to official data.

Mortgage arrears have returned to pre-pandemic levels, a review of household finances has found, however the figures do not include borrowers who have agreed a payment holiday with their lender.

Around 1% of mortgage borrowers are in arrears, which is a decline from the 6% recorded in June and July 2020, the second wave of the government’s Household Resilience Study shows.

Yet the higher arrears figure resulting from the first questionnaire may have included some borrowers on payment holidays as the wording was changed for the second wave of the research.

This makes it difficult to determine whether the position of borrowers has improved or whether the change is the result of borrowers on payment holidays being excluded from the second count.

Today’s figures suggest that around 73,000 home owners were in arrears, which is on top of the 130,000 borrowers who had taken a mortgage payment holiday as of December 2020, according to UK Finance.

A further 3% of borrowers who were not currently in arrears reported that they were “fairly” or “very likely” to fall behind with their mortgage in the next three months, representing around 218,000 households.

One in ten borrowers reported finding it “rather” or “very difficult” to keep up with their mortgage payments in the last year, representing 712,000 households, unchanged from June-July 2020. 

The main reasons  for such difficulties were being furloughed on reduced pay for 34%, working fewer hours/less overtime for 31%, unemployment for 25% and an increase in other payments for 19%.

Arrears among tenants in the private rented sector remain almost three times higher than before the pandemic at 9% up from 3% in 2019/20.

This equates to 353,0000 households who are currently behind with rent.

A further 8% of private renters said they were “very” or “fairly” likely to fall behind with rent payments in the next three months, representing around 278,000 households.

Overall 22% of private renters reported finding it more difficult to keep up with rent payments since June-July 2020.

The main reasons were being furloughed on reduced pay for 15% or working fewer hours/less overtime for 14%.

Over the course of the pandemic, the proportion of social renters in arrears

has not changed at around 11%.

In a further sign of financial pressures mounting, 12% of households were behind with at least one household bill.

Owner occupiers were less likely to behind than renters, with 3% of outright owners behind with one or more bills and 6% of those with a mortgage.

Among private renters, 24% were behind with one or more bills, as were 28% of social renters.

Hargreaves Lansdown personal finance analyst Sarah Coles says: “The pandemic has dragged hundreds of thousands of people to the wrong side of the resilience gap, and renters, self-employed people, lone parents and furloughed workers have been hit particularly hard.

“Overall, more households have savings than before the pandemic, and 13% of people have been in a position to actually put more aside, but those in full time employment and people who own a house with a mortgage are much more likely to fall into this bracket.

“Meanwhile, a quarter have seen their savings fall, and vulnerable groups are more likely to have suffered. 

“People on lower furlough incomes and the self-employed who lost work have been less able to save. 

“Meanwhile, those who rent are more likely to have eaten into their savings to pay rent.

“They’ve struggled with their bills too. 

“Renters have found it far harder to pay their bills: one in ten are behind on rent, and almost one in four are behind on at least one bill.

“Lone parents are most likely to have fallen behind with bill payments.”

Coles adds: “A year on from the start of the crisis, there are no easy costs left to cut. 

“There are also signs that people have already made bigger changes to their lives to keep a lid on costs. 

“Around a fifth of privately rented households have increased by at least one person, which is a sign people are moving in with others to cut costs.”