Mortgage arrears and claims for repossession are on the rise as official data shows how much homeowners are still struggling in the housing market.
Figures from banking trade body UK Finance show there were 87,930 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the third quarter of 2023, 7% greater than in the previous quarter and up 18% annually.
Within the total, there were 34,110 homeowner mortgages in the lightest arrears band, representing between 2.5% and 5% of the outstanding balance – up 10% on a quarterly basis and up 36% annually.
The level of homeowner mortgaged repossessions dropped 9% over the quarter to 630, down 10% year-on-year.
Mortgages in arrears accounted for 0.93% of all homeowner mortgages outstanding, and 0.44% of all buy-to-let mortgages outstanding in the second quarter of 2023, UK Finance said.
The trade body added that in the third quarter of 2009 – during the financial crisis - the number of homeowner and buy-to-let mortgages in arrears was 207,200 – more than twice the 99,480 seen last quarter.
UK Finance said: “This reflects the benefits of lender stress tests carried out to ensure borrowers will be able to keep up with their mortgage payments, even if their interest rate rises above those in place when they first took out their mortgages.”
Meanwhile, Ministry of Justice data shows possession claims increased by 14% from 3,681 to 4,185 between July and September, orders rose 18% from 2,480 to 2,923, but repossessions by county court bailiffs decreased from 758 to 622.
Charlotte Nixon, mortgage expert at Quilter, said the uptick in possession claims is a “clear signal” of the rising financial pressure on homeowners.
She said: “In a contrasting trend, actual repossessions, have decreased by 18% to 622. This suggests some homeowners are finding ways to avert the final act of losing their homes, possibly through renegotiated payment arrangements or other forms of assistance. Potentially initiatives like the Mortgage Charter have helped to decrease repossessions providing a sliver of hope that there may be a growing cushion against the ultimate displacement from one's home, despite the uptick in initial legal proceedings.
“These figures represent the heightened financial distress that is becoming increasingly widespread across regions, with possession claims rising in every area. London stands out with the highest rates of both private and social landlord claims, a testament to the acute cost pressures in the capital.”
The data prompted the Liberal Democrats to repeat calls for a Mortgage Protection Fund, with targeted support to prevent people losing their home, funded through scrapping tax cuts for the banks.
Sarah Olney, Liberal Democrat Treasury spokesperson, said: "This sharp rise in mortgage arrears should be ringing alarm bells in Downing Street.
"The Conservative Party crashed the economy and is now forcing ordinary families to pick up the tab.
"Homeowners facing mortgage misery should be offered a rescue scheme, with targeted support to protect those most at risk of losing their home. It is the least this government could do after the economic damage they have caused."