Mortgage arrears hit record lows in the first quarter of this year, figures from mortgage trade body UK Finance have revealed.
The figures showed there were 7,800 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance in the first quarter, 8 per cent fewer than in the same period of the previous year.
This is the lowest level since records began.
A total of 24,100 people had mortgages with more significant arrears, of 10 per cent or more of the outstanding balance, which is 3 per cent fewer than the previous year.
There were 4,500 buy-to-let mortgages in arrears of 2.5 per cent or more, and 1,100 of them had arrears of 10 per cent or more.
This represented a 6 per cent drop from the previous year.
Despite this fall, the number of homes that were repossessed remained the same, with 1,200 homeowner mortgage properties taken into possession.
Jackie Bennett, director of mortgages at UK Finance, said that while the figures were good, arrears and repossessions could increase due to the change to Support for Mortgage Interest (SMI), which has become a loan rather than a benefit.
Ms Bennett said: “Only a small minority of those eligible for the SMI loan have taken it up so far.
“Lenders will proactively help borrowers in receipt of Support for Mortgage Interest (SMI) to see if there are other ways to make up their payments if they do not want to take out the loan.
“As ever, customers should not hesitate to contact their lender if they anticipate any payment problems and want to discuss what options are available. Repossession is always a last resort.”
Jonathan Harris, director of mortgage broker Anderson Harris, warned that there was “no room for complacency” following the figures.
He said: “Borrowers need to be prepared. We suspect that when it comes to their finances there are many people who don’t have a buffer to tide them over should they get into difficulty.
“Borrowers must plan ahead and consider how they will cope if interest rates rise. Fixed rate mortgages are still great value and remain competitively priced. It is also vital that borrowers keep their lender in the loop if they are struggling to pay their mortgage.
“Lenders are being flexible and showing forbearance but it is much easier and less stressful to come up with solutions early on than further down the line when options may be much more limited.”
Jeremy Leaf, north London estate agent and a former Rics residential chairman, said: “These figures are interesting because they show a housing market which, although softening, is unlikely to collapse anytime soon, despite all the gloom and doom we have seen over the past few days in Halifax and Rics data.
“One of the precursors of a more significant correction in property prices is more forced sales and clearly we are not seeing, or likely to see, that at the moment, particularly while mortgage rates are so low, wages are actually creeping up ahead of inflation and employment numbers remain strong.”
Source: FT Adviser