"There was a modest increase in arrears in March which relates to the start of the crisis before payment holidays were introduced."
There were 72,380 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of 2020, up from the 70,880 recorded at the end of 2019 but 6% fewer than in the same quarter of 2019.
Within the total, there were 22,050 homeowner mortgages with more significant arrears of over 10%. This was up from 21,770 in Q4 but 6% fewer than in Q1 2019.
The number of buy-to-let mortgages in arrears of over 2.5% also fell by 6% year-on-year.
UK Finance says the relatively small increase in arrears compared to Q4 2019 is "likely due to the early effects of Covid-19, and the industry has since introduced multiple forbearance measures to reduce financial difficulties for borrowers who are in need of support".
1,070 homeowner mortgaged properties were taken into possession in Q1, 23% fewer than in the same quarter of the previous year.
640 buy-to-let mortgaged properties were taken into possession over the same period, 8% more than in the same quarter of the previous year.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "With the government extending its furlough scheme, and the Financial Conduct Authority looking at the possibility of mortgage payment holidays for up to a year, it is to be hoped that one of the effects of coronavirus will not be a surge in borrowers in difficulty paying their mortgage and indeed having their homes repossessed.
"According to UK Finance, there was a modest increase in arrears in March which relates to the start of the crisis before payment holidays were introduced. Even with interest rates so low, which should mean mortgage payments are relatively affordable, the pandemic has resulted in much economic uncertainty. Thankfully, lenders continue to show forbearance and flexibility towards those borrowers who are struggling with their mortgages, with many homeowners being granted payment holidays."
Dave Miller, client account manager at Spicerhaart Corporate Sales, commented: “The modest rise in arrears from Q4, an increase of just over 2%, can be attributed to the early impact of Covid-19, as homeowners’ income began to be affected by a fall-off in economic activity.
“As UK Finance themselves point out, mortgage payment holidays were introduced shortly after this, and this should enable most borrowers to avoid getting into serious difficulties. The Government’s furlough scheme will also be of benefit in this respect.
“There remains a serious issue for the more than 22,000 homeowners with arrears of 10% of their mortgage balance or more – a number that had been gradually falling before Covid-19 struck but still highly significant for the individuals and families involved. Although they will benefit in the short run from the cessation of possessions activity, the longer it goes on, the worse their position becomes.
“Most of those borrowers are unlikely to be in a better position to address those arrears after the payment holiday is ended, and both lenders and the Government need to think through what the best approach is to helping people in that situation.”
Jeremy Leaf, former RICS residential chairman, added: "This looks very much like the calm before the storm as the numbers are quite historic and put together at a time when the market was starting to build up quite nicely. Now, of course, many bets are off and lenders have been obliged to keep offers open in the hope that deals can be re-connected shortly. On the other hand, some lenders will be nervous of keeping to previous commitments particularly if it is found that values soften and applicants’ financial positions have changed as a result of furlough or redundancy.
"There is not much point in lenders failing to show forbearance as repossession may not result in a sale of the property at anything like the value anticipated until the market settles down again."
