Arrears and possessions

Data Published on 12/08/2021

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

Latest Data - Q2 2021

Key data highlights:

  • Total mortgage arrears remain close to historically low levels due to the mitigating effects of payment deferrals and other tailored forbearance, as shown in the chart below. Early trends shows that arrears are moving on twin tracks; Covid-19 related support has helped customers to remain out of arrears but those in pre-pandemic financial difficulty have continued to build up arrears, notwithstanding the application of payment deferrals.
  • 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 a total of 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 Covid-19 pandemic, allowing mortgage borrowers to defer payments to meet other financial commitments. While the Covid-19 payment deferral scheme has now ended, lenders are continuing to offer tailored forbearance and support to borrowers who continue to need help meeting their mortgage payments.
  • It remains 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. Overall, there was a reduction of 1,370 mortgages in arrears compared to the previous quarter, with a total of 76,270 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance.
  • Within the total, there were 26,560 homeowner mortgages in early arrears (those between 2.5 and 5 per cent of balance in arrears), a decrease of 5 per cent on the previous quarter. Over the same period in 2020, the number of mortgages in early arrears increased modestly, largely due to payment difficulties caused by the first lockdown prior to payment deferrals being introduced. Since then, payment deferrals provided those borrowers who found themselves in early arrears with the ability to pay these off. These actions resulted in an overall decline in early homeowner arrears over the course of 2020, with the number of cases in Q2 2021 remaining lower than the number of cases before the Covid-19 pandemic began. The winding-down of the Job Retention Scheme by end September 2021 may have an impact on this decline. However, as lenders continue to offer forbearance, we anticipate that the early arrears will increase at a gradual pace as the economic impacts of the pandemic continue to unfold.
  • Within the overall total, there were 27,910 homeowner mortgages with more significant arrears (representing 10 per cent or more of the outstanding balance), an increase of 630 on the previous quarter. This figure has slowly increased since Q1 2020, but from a low base. These increases are largely driven by customers with more complex circumstances 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 6,020 buy-to-let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the second quarter of 2021, a small increase of 50 on the previous quarter. The continued small increases in buy-to-let arrears from a low base are likely due to the Covid-19 pandemic. Lenders are continuing to support buy-to-let customers with payment difficulties resulting from Covid-19.
  • Only 210 homeowner mortgaged properties and 230 buy-to-let mortgaged properties were taken into possession in the second quarter of 2021. It is important to note that year-on-year comparisons will look unusually large due to the Possession Moratorium that was in place from March 2020 - 1 April 2021. No involuntary possessions took place in this period. There were only 90 more possession cases in Q2 2021 than the quarter before. Government restrictions on evictions were in place until 31 May 2021 in England and 30 June 2021 in Wales. Additionally, lenders continue to prioritise those requiring urgent resolution due to vulnerability or where it is of benefit to the customer. This means that we do not expect significant increases in possessions immediately following the lifting of the Possessions Moratorium and restrictions on evictions. Instead, possessions are expected to increase slowly as the backlog of cases from 2020 unwind. Possession is always a last resort after tailored support is exhausted and a thorough court-based process has carefully considered the borrower’s individual circumstances.

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

The mortgage payment deferral scheme continued to help customers throughout Q2 2021, resulting in a decline in early arrears on the previous quarter and lower levels than before the pandemic began.

“The scheme has now come to an end and the majority of customers who used it have now returned to making regular payments. There is ongoing support for anyone who is still struggling, including tailored assistance and 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 - 18 August 2021