Number of Landlords in Serious Arrears Soars by 20%

The number of buy-to-let landlords in serious mortgage arrears (defined as 10% or more of the outstanding balance) soared by 20% over the year to the fourth quarter (Q4) of 2017, according to UK Finance’s latest Mortgage Arrears and Possessions Update.

However, the finances of homeowners seem to have improved, with 82,800 homeowner mortgages in arrears of 2.5% or more in Q4 2017 – 7% fewer than in Q4 2016.

Within the total, there were 24,700 homeowner mortgages with more serious arrears (10% or more). This was down by 1% on the same quarter of the previous year.

In Q4 last year, there were 5,100 buy-to-let mortgages in arrears of 2.5% of more, which is 2% greater than in Q4 2016.

Within this total, there were 1,200 buy-to-let mortgages with more serious arrears – up by a significant 20% on the same quarter of the previous year.

1,100 homeowner mortgaged properties were taken into possession in Q4 2017 – 8% fewer than in Q4 2016.

600 buy-to-let mortgaged properties were taken into possession in Q4 last year, which is unchanged from the same quarter of the previous year.

Paul Smee, the Head of Mortgages at UK Finance, comments on the data: “Annual homeowner possessions currently stand at a 36-year low, with overall arrears and possessions continuing to decline. This reflects the mortgage industry’s continued commitment to appropriate and prudent lending.

“All potential borrowers are carefully assessed against their ability to pay back their loans, and lenders work closely with their customers to ensure that any payment issues are dealt with at an early stage. Anyone experiencing difficulty with their mortgage should contact their provider immediately.”

Alastair McKee, the Managing Director of independent mortgage broker One 77 Mortgages, also responds: “It’s the divergence in the fortunes of landlords and homeowners that comes through in this data.

“While it’s fantastic news that homeowner arrears are at such deep historic lows, those in the industry are well aware this decline has probably bottomed out and has only fallen as far as it has because lending is so cheap.”

He explains: “A 7% drop in just a year is evidence of this. Homeowners have been able to buy themselves time by remortgaging, so it’s vital, even if wage growth picks up, that people are sensible about what they can afford to borrow.

“Landlords, meanwhile, have faced tightening criteria, worsening tax treatment and typically have tighter margins.

He continues: “Landlord loan-to-values are normally close to their maximum anyway. That’s why you’ve seen arrears in this sector rise while arrears for homeowners have fallen.

“Those with buy-to-let mortgages don’t have the same wriggle room, because low interest rates don’t afford them the same opportunity to create extra head room in tricky times.”