"It is likely we will not see the full extent of the Covid-19 crisis on mortgage arrears until government support measures for homeowners end."
There were 73,580 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2020, 3% fewer than in the same quarter of 2019.
Within the total, there were 22,840 homeowner mortgages with more significant arrears (representing 10% or more of the outstanding balance), an annual fall of 2%.
The number of homeowner arrears increased in Q1 2020, likely due to the early effects of Covid-19, and have remained at similar levels in Q2 2020. However UK Finance says these levels of arrears remain significantly lower than those seen in previous years.
There were 5,000 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2020, 6% greater than in the same quarter of the previous year. Within the total, there were 1,270 buy-to-let mortgages with more significant arrears - 5% greater than in Q2 2019. UK Finance says this recent increase in buy-to-let arrears is "relatively small and from a low-base", and is likely due to the early effects of Covid-19. Again, these levels of arrears remain lower than seen in previous years.
90 homeowner mortgaged properties and 130 buy-to-let mortgaged properties were taken into possession in the second quarter of 2020 - 93% and 80% fewer, respectively, than in 2019. Following the industry moratorium on involuntary possessions, these low possessions numbers in Q2 2020 reflect cases where the customer requested the possession to go ahead or where the property was vacant.
Over two million mortgage payment deferrals have been approved to date, with just under one million still in place as borrowers begin to exit their payment deferral arrangements and resume monthly payments.
Steve Seal, managing director at Bluestone Mortgages, commented: “While on the surface, today’s figures may look promising, it is likely we will not see the full extent of the Covid-19 crisis on mortgage arrears until government support measures for homeowners end. Mortgage payment holidays, for example, have gone a long way towards helping homeowners who have faced financial difficulty during the pandemic, ultimately keeping the number of mortgages in arrears low – at least for the time being.
“Once payment holidays end, however, it is likely that some homeowners, particularly those who have been financially impacted by the crisis, will struggle to keep up with their mortgage repayments – something which could affect their credit profile in the long-run. As a result, their chances of securing a remortgage on the high street could suffer, leaving them wondering what the alternative options are.
“This is where advisers come into their own. Advisers are able to support borrowers with lending solutions that can be tailored according to their unique circumstances and reassure them that the refinancing they need is within reach. However, brokers will need the support of specialist lenders if they are to continue serving these borrowers, both as the crisis continues and once it subsides. This will be particularly important once we start to see numbers of underserved customers increasing as a result of the pandemic.”
