Figures from the UK Finance show there were a total of 79,620 homeowner mortgages in arrears at the end of December 2021. This is 750 fewer mortgages when compared to the previous quarter’s figures.
These figures related to mortgages where arrears are 2.5% or more of the outstanding mortgage balance.
Within this total there were 26,850 homeowner mortgages in early arrears (those between 2.5% and 5% of balance in arrears), a decrease of 2% on the previous quarter and 14% fewer than the same period in 2020.
UK Finance says these early arrears figures remain substantially lower than the numbers seen before the pandemic began.
However, UK Finance says the number of homeowners with more significant arrears (representing 10% or more of the outstanding mortgage balance) has risen. In total there were 30,010 mortgage holders in this position, 350 more cases than the previous quarter. This figure has risen — from a low base — since Q1 2020, although the rate of increase has slowed.
UK Finance says these customers were already in relatively deep arrears positions prior to the pandemic, and will likely have made use of the full six months of Covid-19 payment deferrals scheme. They are equally likely to be receiving (or in need of) further support through lenders’ tailored forbearance options.
The figures show there were a total of 6,010 buy-to-let mortgages in arrears in the fourth quarter of 2021 – an increase of 2% compared with the previous quarter but 1% down on the number a year previously.
When it comes to repossessions, the figures show that there were 390 homeowner mortgaged properties and 320 buy-to-let mortgaged properties taken into possession in the final quarter of 2021.
UK Finance says 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 20 fewer possessions in Q4 2021 compared with the previous quarter. The voluntary possessions moratorium ended on 4 January 2022, and the number of possessions will now gradually increase as the courts resume working through the backlog of cases accumulated over the first moratorium.
Commenting on these figures Equifax’s chief data and analytics officer Paul Heywood says while these figures are encouraging there are potential dangers on the horizon.
He says: “Far fewer homeowners than feared fell into arrears on their mortgage repayments in the early months of the pandemic, thanks in part to emergency consumer protections such as furlough and mortgage payment holidays.
“Even today, we are still seeing a relatively low level of arrears as most homeowners in the UK took advantage of lockdowns to build up rainy day savings and insulate against future income shocks.
“That picture, however, is quickly changing. Prices are rising, interest rates are creeping up, and unless wages keep pace, most borrowers will see their finances squeezed over the coming months.
“Equifax data suggests that these financial pressures are already leading to growing numbers of people falling behind on loan repayments in the consumer credit and motor finance space, and we would expect mortgage arrears to follow suit in the coming months.”
He adds: “As the UK walks headlong into a cost of living crisis, credit affordability is more important than ever, and we encourage credit providers, whether they be lenders or utility companies, to be looking closely at how innovations such as Open Banking can help them to identify people in need of help before they fall into acute financial difficulty.”
