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Warning as Buy To Let investors’ arrears double in a year

The number of landlords who have fallen behind on their mortgages has jumped, says lenders trade body UK Finance.

Buy to let mortgages in arrears more than doubled in the final three months of 2023 compared to the same period the year before. 

UK Finance said there were 13,570 BTL mortgages in arrears in the final quarter of last year out of approaching two million BTL mortgages in total. 

These arrears rose by 18 per cent compared with the previous three months but compared to the year before, the increase was more pronounced.

Of the 13,570 buy to let mortgages in arrears, around half were in the lightest arrears band representing between 2.5 and 5 per cent of the outstanding balance. 

And some 500 buy to let properties were repossessed in the same quarter, 11 per cent up on the previous three month period.

The trade body also released figures on the number of homeowners who had fallen behind on their mortgages. A total of 93,680 were in arrears, which was up 7% on the previous quarter and 25 per cent up on the same period a year earlier.

Mortgage experts, speaking to financial news service Newspage, responded with dismay to the figures.

Ranald Mitchell of Chatwin Private Clients comments: “The increase in arrears is a consequence of the higher interest rates mortgage holders are now facing. Many stretched mortgage affordability to the limits when rates were at all-time-lows and just aren’t able to cope. It is a vicious circle of events, as mortgage arrears leave them with a massive black marks on their credit files for the next six years, denying them the everyday credit options that are required in modern living.”

Hannah Bashford of Model Financial Solutions puts it this way: “These statistics will be a stark reminder of the financial stress homeowners and landlords are still under. There is always going to be a lag with this data as there has been the Mortgage Charter and people will have been using their savings to keep making their repayments but as those savings dry up or the end of the six months nears, people who are struggling may fall into arrears. We certainly haven’t seen the end of this and I fear there will be more to come.”

Ben Perks of Orchard Financial Advisers thinks the figures could have been even worse if not for recent initiatives. He says: “You have to ask to what extent is this data being impacted by a combination of the Mortgage Charter and lenders being more lenient given current economic circumstances? The amount of mortgage possession claims has increased, which indicates payment arrears are on the rise, which is no surprise at all in the current climate. Covid, the cost-of-living crisis and rising interest rates have all taken their toll on people’s finances. The Mortgage Charter has given people options to reduce payment for six months, so the repossession figures may just be delayed.”

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