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Mortgage arrears fall in fourth quarter: UK Finance

The number of homeowners in arrears on their mortgage continued to decline in the fourth quarter of 2021, despite the removal of the government’s furlough scheme at the end of the September.

Figures from the UK Finance show there were a total of 79,620 homeowner mortgages in arrears at the end of December 2021. This is 750 fewer mortgages when compared to the previous quarter’s figures.

These figures related to mortgages where arrears are 2.5% or more of the outstanding mortgage balance.

Within this total there were 26,850 homeowner mortgages in early arrears (those between 2.5% and 5% of balance in arrears), a decrease of 2% on the previous quarter and 14% fewer than the same period in 2020.

UK Finance says these early arrears figures remain substantially lower than the numbers seen before the pandemic began.

However, UK Finance says the number of homeowners with more significant arrears (representing 10% or more of the outstanding mortgage balance) has risen. In total there were 30,010 mortgage holders in this position, 350 more cases than the previous quarter. This figure has risen — from a low base — since Q1 2020, although the rate of increase has slowed.

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UK Finance says these customers were already in relatively deep arrears positions prior to the pandemic, and will likely have made use of the full six months of Covid-19 payment deferrals scheme. They are equally likely to be receiving (or in need of) further support through lenders’ tailored forbearance options.

The figures show there were a total of 6,010 buy-to-let mortgages in arrears in the fourth quarter of 2021 – an increase of 2% compared with the previous quarter but 1% down on the number a year previously.

When it comes to repossessions, the figures show that there were 390 homeowner mortgaged properties and 320 buy-to-let mortgaged properties taken into possession in the final quarter of 2021.

UK Finance says year-on-year comparisons will look unusually large due to the ‘Possession Moratorium’ from March 2020 to 1 April 2021, over which period no enforced possessions took place.

In absolute terms, there were 20 fewer possessions in Q4 2021 compared with the previous quarter. The voluntary possessions moratorium ended on 4 January 2022, and the number of possessions will now gradually increase as the courts resume working through the backlog of cases accumulated over the first moratorium.

Commenting on these figures Equifax’s chief data and analytics officer Paul Heywood says while these figures are encouraging there are potential dangers on the horizon.

He says: “Far fewer homeowners than feared fell into arrears on their mortgage repayments in the early months of the pandemic, thanks in part to emergency consumer protections such as furlough and mortgage payment holidays.

“Even today, we are still seeing a relatively low level of arrears as most homeowners in the UK took advantage of lockdowns to build up rainy day savings and insulate against future income shocks.

“That picture, however, is quickly changing. Prices are rising, interest rates are creeping up, and unless wages keep pace, most borrowers will see their finances squeezed over the coming months.

“Equifax data suggests that these financial pressures are already leading to growing numbers of people falling behind on loan repayments in the consumer credit and motor finance space, and we would expect mortgage arrears to follow suit in the coming months.”

He adds: “As the UK walks headlong into a cost of living crisis, credit affordability is more important than ever, and we encourage credit providers, whether they be lenders or utility companies, to be looking closely at how innovations such as Open Banking can help them to identify people in need of help before they fall into acute financial difficulty.”

Source: Mortgage Finance Gazette

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Nearly 800,000 home-owners are ‘vulnerable to repossession’

Nearly 800,000 households across the UK could be at risk of home repossession if they suffer a loss of income, according to analysis by a think-tank.

The Social Market Foundation said that of the 770,000 it calculates may be at risk of repossession, a quarter (26%) work in retail or manufacturing, sectors badly hit by the pandemic.

SMF research funded by the Building Societies Association (BSA) suggests more than one in 10 owner-occupiers do not have enough savings to cover a single month’s mortgage payment.

A ban on home repossessions has been put in place as part of coronavirus support measures and borrowers have also been able to take mortgage payment holidays.

Opinium polling of 2,000 mortgage-holders commissioned for the SMF found 29% had seen their household savings decrease during the pandemic.

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Close to 800,000 home-owners could be at risk of losing their home during these turbulent economic times

Scott Corfe, Social Market Foundation

Nearly half (46%) of mortgage-holders on incomes up to £20,000 said they have seen their savings decline.

The SMF suggested that a time-limited hardship grant could protect households from building up additional financial burdens.

Research director Scott Corfe said: “Close to 800,000 home-owners could be at risk of losing their home during these turbulent economic times.”

Paul Broadhead, head of mortgages and housing at the BSA, said: “With the growth in wealth and income inequality as a result of the Covid-19 pandemic, it’s now more important than ever to look at all possible options that could help home-owners who are struggling to meet their mortgage payments beyond lender forbearance.

“There isn’t one single solution that will support all those in need. Stakeholders, including Government and lenders, need to work together to ensure that home-owners and families, whether they’re dealing with temporary or longer lasting financial difficulties, have the best chance of overcoming their difficulties and enjoy a home which is financially sustainable.

“I hope that the findings in this independent report will stimulate debate and that a range of flexible and compassionate options can be found to create positive futures for those whose prospects may currently feel pretty bleak.”

The SMF analysed the Wealth and Assets Survey as part of its research.

By Vicky Shaw

Source: Belfast Telegraph

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