UK Finance has reported that the number of mortgages in arrears of 2.5% or more of the outstanding balance fell again in the third quarter of 2017, but cases of possession edged upwards from an historically low level.
At 88,300, the number of loans in arrears was two% lower than in the second quarter of the year (90,400) and at its lowest level since this run of data began in 1994.
Chart 1: Arrears on mortgages, 2.5% or more of balance outstanding
Source: UK Finance
The number of properties taken into possession in the third quarter nudged upwards to 1,900, the same total as in the first three months of this year. The second quarter total of 1,800 cases of possession had been the lowest since quarterly data began in 2008, and the proportion of properties taken into possession (at 0.02%) has remained unchanged in each period since the second quarter of 2015. Within the total, the number of owner-occupied properties taken into possession increased in the third quarter from 1,100 to 1,300, while buy-to-let repossessions fell from 700 to 600. The last time the number of owner-occupied possessions rose was in the first quarter of 2014, when the total increased from 4,900 to 5,000.
Chart 2: Number of possessions, owner-occupied and buy-to-let markets
Source: UK Finance
The number of mortgages in arrears fell across all bands, apart from those owing 10% or more of the outstanding balance. The number of mortgages in this category edged up by 0.4% from 25,500 to 25,600, partially reversing a four% fall in the number of loans in this category in the second quarter of the year.
A total of 83,300 owners-occupiers were in arrears of 2.5% or more of the balance, down two% from 85,300 in the second quarter. Reflecting the pattern across the wider market, owner-occupier arrears declined in all bands apart from those owing 10% or more of the balance, with the total in this category edging up from 24,400 in the preceding quarter to 24,500.
Buy-to-let arrears were flat, apart from a small increase in those with higher levels of debt. Overall, the number of buy-to-let mortgages in arrears increased by two% to 5,100 (5,000 in the second quarter).
Chart 3: Arrears by bands as a proportion of total balance
Source: UK Finance
June Deasy, UK Finance’s head of mortgages policy, said: “Even a small rise in mortgage possessions is disappointing but, after a long period of declining numbers, it was inevitable that they would rise again at some stage. Both arrears and possessions remain low by historical standards and look set to be lower for the year than we predicted at the start of 2017.
“We expect the vast majority of mortgage borrowers to continue to manage their finances successfully but they should continue to keep their plans under review. Any customer who thinks they may experience payment difficulty should always speak to their lender at the earliest opportunity. Lenders remain committed to working with borrowers to keep them in their home wherever possible, and possession continues to be the last resort.”
Mark Pilling, managing director of Spicerhaart Corporate Sales, added: “It is pleasing to see the repossession and arrears figures for Q3 have remained consistent, despite recent uncertainty and rising inflation.
“However, the landscape is changing and we could see a shift in the coming months. RICS has already reported that house prices are falling in many regions and 60-70% of properties on the market above £500,000 are now selling below asking price. Of course there is a difference between what a seller wants to achieve and what a property is actually worth. In the north where prices are lower we are still achieving market value or above for our clients, but RICS figures are taken across the country, which means London and the south east will always skew the data.
“As interest rates start to rise, wage growth remains stagnant, and we have inflation at 3%, now is the time for lenders to be keeping a close eye on their clients’ ability to keep up their repayments and engage with third parties to look after every borrower’s best interests.”