Mortgage arrears rate remains at 20-year low

Homeowners have the lowest rate of arrears on their mortgages for 20 years, according to the latest data from the Council of Mortgage Lenders (CML).

The overall rate of mortgage arrears in the third quarter of 2016 was the same as in the second quarter, with 0.84% of all mortgages recording arrears of more than 2.5% of the mortgage balance.

The CML said that the repossession rate also remained the same in the third quarter as the three months previous, at 0.02%, representing 1,900 mortgages. Of these 1,300 were owner-occupied and 600 were buy-to-let.

Although the rate of arrears was static, the number of mortgages in arrears went up slightly in the third quarter of 2016 to 93,300, up from 92,500 in the previous quarter. This was in line with the rise in the estimated total number of outstanding mortgages, up from 11,058,000 to 11,108,000, mostly due to a rise in the number of outstanding buy-to-let mortgages but also because of a small rise in home-owner mortgages.

Within the number of mortgages that are in arrears, there has been a shift in the make-up of these cases. The number with lower level arrears continues to fall, from 39,600 cases to 39,000 cases but the band with the highest arrears of 10% or more is rising, up from 22,800 cases to 24,000 cases.

The CML said this is probably due to distortions in the timing of repossession orders due to court and regulatory activity.

CML director general Paul Smee said: “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. 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.

“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 the future. “