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Home owner mortgage arrears at record lows but more landlords struggling


Landlord mortgage arrears have begun to increase, new industry data says, while a separate new study forecasts that even if house prices were to fall as hard as they did in the last crash, a far smaller percentage of home owners would be affected by negative equity.

Figures from banking trade body UK Finance show there were 5,100 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the fourth quarter of 2017, 2% higher year-on-year.

More worryingly, within this total, there were 1,200 buy-to-let mortgages with arrears representing 10% or more of the outstanding balance, up 20% annually.

Meanwhile, arrears worth more than 2.5% remained low for home owners at 82,800, down 7% since the fourth quarter of 2016.

Overall, 1,100 home owner mortgaged properties were taken into possession in the fourth quarter of 2017, 8% down year on year, while 600 buy-to-let mortgaged properties were taken into possession, unchanged from 2016.

Paul Smee, head of mortgages at UK Finance, said: “Annual home owner repossessions 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.”

However, Alastair McKee, managing director of broker One 77 Mortgages, suggested home owners are being supported by low rates.

He said: “It’s the divergence in the fortunes of landlords and home owners that comes through in this data.

“While it’s fantastic news that home owner 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.

“Home owners have been able to buy themselves time by remortgaging but those with buy-to-let mortgages don’t have the same wriggle room.”

Meanwhile, separate analysis by mortgage administrator Computershare Loan Services has forecast that only a small percentage of borrowers would be affected by negative equity if house prices fall as hard as they did in the last crash.

Computershare estimates that 4.12% of properties – or approximately 458,000 households – would drop into negative equity if average house prices fell by 18.72% as they did between 2006 and 2009.

Its data suggests that households in the north would be hit the hardest, with an increase of 6.79% in negative equity if prices dropped by 19% followed by Northern Ireland and Wales at 6.18% and 6.12% respectively.

Andrew Jones, chief executive at Computershare Loan Services, said: “Negative equity can create serious financial problems for borrowers and their families, so a substantial decrease in the average house price could contribute to significant economic problems in the event of another crash.

“Nevertheless, it seems that better lending practices by mortgage providers since 2008 have ensured that the consequences of such a fall could be significantly less damaging than after the last financial crisis.”


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Source:: Home owner mortgage arrears at record lows but more landlords struggling