Mortgages

Is Universal Credit to blame for rising buy-to-let mortgage arrears?

Residential mortgage arrears remained at historic lows in Q3, according to the latest data from UK Finance, but the number of buy-to-let borrowers in significant arrears rose by 3% compared to 2017.

Rozi Jones
|
8th November 2018
house sale buyer mortgage
"The Residential Landlord Association revealed that 61% of landlords with tenants receiving Universal Credit have had problems with non-payment and arrears"

Residential mortgage arrears remained at historic lows in Q3, according to the latest data from UK Finance, but the number of buy-to-let borrowers in significant arrears rose by 3% compared to 2017.

There were 4,660 buy-to-let mortgages in arrears of 2.5% or more in Q3, 1% fewer on an annual basis, and within this total 1,150 had arrears of over 10%.

However the number of buy-to-let properties taken into possession fell by 17% to 500.

Mark Pilling from Spicerhaart Corporate Sales, who deal with arrears and repossessions on behalf of lenders, suggests the issues with Universal Credit could be a factor in the rising number of buy-to-let arrears.

He said: “These figures suggest that the problems with Universal Credit are now really starting to impact landlords.

“Last month, the Residential Landlord Association revealed that 61% of landlords with tenants receiving Universal Credit have had problems with non-payment and arrears, and on average, these tenants owe 49% more than they did a year ago.

“Universal Credit has been plagued by problems since it was introduced, and while the Government announced in the Budget that more money will be dedicated to the new welfare system, it is clear that much of the damage has already been done. Many claimants experienced huge delays in receiving their money, forcing them into arrears, and many are receiving far less than they did with the old system, which means in many cases, they simply do not have enough money to pay their rent on their reduced incomes.

“From a lenders point of view, it is important that they keep a close eye on their buy to let customers who have tenants who are on or are soon to be moved onto Universal Credit so they are able to work out the best solution for those who are struggling so that repossession is a last resort.”

The UK Finance data shows that the number of homeowner mortgages in arrears fell by 5% to 77,600 and those with significant arrears remained unchanged from Q3 2017.

1,080 homeowner mortgaged properties were taken into possession in Q3, 19% fewer than in the same quarter of the previous year.

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