Derin Clark

Derin Clark

Online Reporter
Published: 14/11/2019

Figures released today show that the number of homeowners in mortgage arrears has fallen by 9% in the period of July-September 2019, compared to the same period in 2018.

According to data released by UK Finance, there were 71,590 homeowners in mortgage arrears of 2.5% or more of the outstanding balance between July-September 2019. Along with the fall in the number of homeowners in arrears, the figures also show that there has been a drop in homeowners with more significant arrears of 10% or more, with 22,300 homeowners with significant arrears during July-September 2019, a fall by 8% from the same period in 2018.

While the number of those in arrears has fallen, the number of homeowner mortgaged properties were taken into possession during July-September 2019 has increased by 19% compared to the same period in 2018. 1,330 of properties were taken into possession during this period, but according to UK Finance, this increase was driven by a backlog of historic cases that are being processed.

Why has arrears fallen?

The fall in the number of homeowners in mortgage arrears could be due to the highly competitive mortgage market that is currently offering low rates and the extension of mortgage terms, which is helping to make mortgage repayments more affordable for many homeowners. In addition to this, the Financial Conduct Authority’s tighter affordability checks has also helped providers to ensure that those they lend to will be able to afford their mortgage repayments.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “It’s been over five years since the introduction of the Mortgage Market Review (MMR), which pushed lenders to lend more responsibly by performing tighter affordability checks. This, along with a combination of low mortgage rates, could well have led to a fall in arrears and repossessions, which is good news. Indeed, UK Finance data shows a sharp fall in properties taken into possession over this period. In addition, lenders have been extending their mortgage terms, which give borrowers longer to repay debts and helps them to pay a lower monthly repayment in the process. However, when extending a mortgage term, borrowers need to be mindful that they will be charged more the longer they have the debt, so if they can, overpaying in a low interest-rate environment could be a wiser option.”

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