Arrears and possessions

Data Published on 13/05/2021

Trends covering arrears and possessions of property linked to first charge mortgages provided by members.

Latest Data - Q1 2021

Key data highlights:

  • Mortgage arrears remain near to the historically low levels as in Q4 2020, as a direct result of payment deferrals and other tailored forbearance, as shown in the chart below. Our blog outlines how the supports provided by lenders to customers continues to impact the arrears and possessions figures. From March 2020 - 31 March 2021, lenders offered payment deferrals of up to 6 months to customers and buy-to-let landlords where Covid-19 had impacted their ability to meet their monthly mortgage payments, with almost 2.9 million granted while the scheme was active. For most borrowers who took one, payment deferrals provided a short-term solution to a change in their economic circumstances due to the Covid19 pandemic, allowing mortgage borrowers to defer payments to meet other financial commitments. For borrowers who need additional support beyond the six month payment deferral, lenders are continuing to offer tailored forbearance.
  • It continues to be the case that mortgage payment deferrals have helped to support customers who were not in financial difficulty at the beginning of the pandemic to remain out of arrears, as borne out in the data. There was a small increase of 230 mortgages in arrears compared to the previous quarter, with a total of 77,640 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance.
  • Within the total, there were 28,100 homeowner mortgages in early arrears (those between 2.5 and 5 per cent of balance in arrears), a decrease of 1 per cent on the previous quarter. Over the same period in 2020, the number of mortgages in early arrears increased modestly, largely due to early payment difficulties prior to payment deferrals being introduced. Since then, payment deferrals allowed borrowers who had found themselves in early arrears to pay these off and prevented additional borrowers from going into arrears. This resulted in an overall decline in early homeowner arrears over the course of 2020, with the number of cases in Q1 2021 remaining lower than the number of cases before the Covid-19 pandemic began. As lenders continue to offer forbearance, we anticipate that the number of early arrears will increase gradually as the economic impacts of the pandemic unfolds.
  • Within the overall total, there were 27,280 homeowner mortgages with more significant arrears (representing 10 per cent or more of the outstanding balance), an increase of 620 on the previous quarter. This figure has slowly increased since Q1 2020 but from a low base. These increases are largely driven by customers who had several missed payments before the pandemic. These borrowers may have made use of the full six months of payment deferrals and are most likely receiving or, in need of, the help available through lenders’ tailored forbearance support. Customers who are facing financial difficulty are encouraged to contact their lender early, as they stand by ready to help.
  • There were a total of 5,970 buy-to-let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the first quarter of 2021, a small increase of 130 on the previous quarter. The continued small increases in buy-to-let arrears from a low base are again due to the Covid-19 pandemic. Lenders are continuing to support customers through payment difficulties resulting from Covid-19.
  • Only 190 homeowner mortgaged properties and 180 buy-to-let mortgaged properties were taken into possession in the first quarter of 2021. Although FCA guidance allowed firms to recommence litigation activity from November 2020, lenders voluntarily committed to pause possessions in line with the Government’s 'winter truce' from 11 December 2020 to 11 January 2021. There were 40 more possession cases in Q1 2021 than the quarter before, where the customer requested the possession to go ahead or where the property was vacant. Possessions will remain low until government restrictions on Bailiff activity ends. Possessions are expected to increase due to the backlog of cases that did not occur in 2020; these cases will have been in train before the pandemic began. Possession is always a last resort after a thorough courtbased process has carefully considered the borrower’s individual circumstances.

Commenting on the data, Eric Leenders, Managing Director of Personal Finance at UK Finance, said:

While there was a slight rise in total arrears in Q1 2021 compared to the historic low levels seen before the pandemic, the additional support from lenders has helped many mortgage customers stay out of arrears.

“With the economic impact of Covid-19 continuing to be felt, we anticipate there will be further increases in mortgage arrears during 2021. Any customer who is concerned about their finances should contact their lender early to discuss the options and tailored support available to them.

Mortgage Arrears Possessions Update - 13 May 2021