Mortgage arrears at 20 year low

The overall rate of mortgage arrears in the UK is still at a 20 year low with no change between the second and third quarters of 2016, the latest published data shows.

According to figures from the Council of Mortgage Lenders some 0.84% of all mortgages recorded arrears, equivalent to more than 2.5% of the mortgage balance.

The overall repossession rate also remained the same in the third quarter as the second quarter at 0.02%, representing 1,900 mortgages of which 1,300 were owner occupier and 600 buy to let.

Although the arrears rate was static, the number of mortgages in arrears rose slightly in the third quarter of 2016 to 93,300, up from 92,500 in the previous quarter, in line with a rise in the estimated total number of outstanding mortgages, up from 11,058,000 to 11,108,000.

The CML report says that this was driven mostly by a rise in the number of outstanding buy to let mortgages but also a modest rise in home owner mortgages.

Within the total of all mortgages in arrears, there was also a shift in the distribution of cases, with the number of cases of lower level arrears continuing to fall, but the heaviest band of 10% or more rising. It is likely that this reflects continuing distortions in the timing of instigating possession actions in the wake of court and regulatory activity.

‘The latest arrears and repossession data still paints a reassuring picture of a market in which financial difficulties are relatively rare, and repossession rarer still. However, there is no denying that economic uncertainty for households is increasing,’ said CML director general Paul Smee.

‘We would strongly urge all mortgage holders to consider whether there are ways that they can plan ahead for possible changes in the future whether this relates to employment prospects, mortgage payments, or other spending,’ he explained.

‘Mortgage lenders are fully committed to ensuring that any home owner who faces temporary financial difficulty gets help, as far as reasonably possible, to resolve it and to remain in their home. This will continue, whatever the economic climate. But the rise in the more serious arrears category perhaps suggests that we should not be entirely surprised if the number of mortgage repossessions rises a little in future reporting periods,’ Smee added.

Meanwhile, the latest figures released by the Finance and Leasing Association (FLA) show that the number of second charge mortgage repossessions in the third quarter of 2016 was 36%, down 35.7% on the same quarter in 2015.

‘The third quarter of 2016 saw further reductions in the number of second charge mortgage repossessions, as lenders continued to settle into the FCA’s MCOB regime while also assisting customers with repayment difficulties,’ said Fiona Hoyle, head of consumer and mortgage finance at the FLA.

‘With just the fourth quarter remaining, we expect the number of repossessions in 2016 as a whole to be lower than in 2015,’ she added.

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Written by: Houseladder