28 May 2023

Repossessions up 50% as homeowners struggle with mortgage payments

Hundreds lose homes as high interest rates cause mortgage pain

The number of homes being repossessed jumped by 50% in the first quarter of this year, according to data from UK Finance.

More homeowners also fell into mortgage arrears during January, February and March as high interest rates caused monthly bills to shoot up.

Despite the increases, UK Finance stresses the data 'should not be a cause for panic'.

Yet further mortgage pain is to come as hundreds of thousands of homeowners will be coming to the end of fixed-rate deals over the next few months.

Here, Which? delves into the figures and looks at what steps you can take to prevent your home being repossessed.

Repossessions reach three-year high

A total of 750 homes were repossessed in the first three months of this year due to missed homeowner mortgage payments. That's a 50% increase from the last quarter.

The number of buy-to-let homes being repossessed (410) also increased in the first quarter of 2023. The figure rose by 28% from the last quarter of 2022.

Using UK Finance figures, the graph shows the number of homes reclaimed since the start of 2020.

While the number of repossessions increased for both homeowner and landlord mortgages, UK Finance says this is from a very low base as historic cases make their way through the courts. The total remains significantly below the levels seen prior to the pandemic.

Find out more: what's happening to buy-to-let mortgage rates?

Increase in mortgage arrears during first quarter

In a further sign of borrowers struggling, the number of homeowners in arrears also rose during the first three months of the year.

Figures show that 76,630 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance. This is 2% greater than in the previous quarter.

Within that total, 28,180 mortgages were in the most severe arrears band of 10% or more of the outstanding balance. This is 1% higher than the previous quarter.

As for buy-to-let loans, there was a 16% uptick in the number of mortgage arrears compared with the last quarter.

Despite the increases, UK Finance principal, Sonia Fernandes, said: 'This should not be a cause for panic. Lenders are proactively supporting borrowers who are worried about their finances.

'Over the last year, lenders have helped nearly 200,000 borrowers who cannot meet their full mortgage payment by providing tailored forbearance.'

Repossession and arrears uptick 'not unexpected'

Amid a time of high interest rates, the increase in repossessions and arrears hasn't come as a shock. UK Finance says the figures are 'not unexpected'.

The average two-year fixed mortgage rate is now 5.34%, and a five-year fix is 5.02%, according to Moneyfacts. Rates also show little sign of falling following the 1 2th consecutive hike to the Bank of England base rate.

Many homeowners are yet to feel the full impact of rising interest rates. In the first three months of this year, 353,000 fixed-rate mortgages came up for renewal, with a further 371,000 coming to an end before July, according to calculations from the Office for National Statistics (ONS).

The majority of these fixed rates were set at interest below 2%, so homeowners will be in for a shock when they come to remortgage.

Find out more: what to do if you need to remortgage

What to do if you're struggling to pay your mortgage

If you think you won't be able to make your mortgage payment, the first thing to do is contact your lender. It's crucial to make them aware that you're struggling, so don't feel embarrassed to pick up the phone and ask for help.

Regardless of whether you're with a major bank or smaller building society, your provider should be willing and able to offer support.

To help in the short-term, your provider may offer a payment holiday, an extension to the mortgage term to lower the monthly payment, or a temporary switch to interest-only repayments.

Find out more: what to do if you're struggling with your mortgage

Are you eligible for the Support for Mortgage Interest loan?

Benefits claimants can get support on their bills with the aid of the government's Support for Mortgage Interest (SMI) loan.

It helps struggling homeowners cover the cost of some of the interest on their mortgage.

To qualify, you will need to be in receipt of one of the following: Income Support, Jobseeker’s Allowance, Employment and Support Allowance, Universal Credit or Pension Credit.

Last month, the government made changes to the eligibility threshold, giving 200,000 benefit claimants the chance to qualify for SMI.

To see how SMI could help you, see our recent news story on the scheme.

When can my lender repossess the property?

Repossessions are the last resort taken by lenders. Before taking this step, your bank must consider any requests you make to change the way you pay your mortgage and work to find a solution with you.

If your lender intends to start repossession action, it must provide you with a list of your missed payments, your outstanding mortgage debt, and the total amount of arrears and charges.

It must write to you five working days before it starts court action and explain why it is applying to court.

Repossessions were rife in the 1990s, with tens of thousands of people being forced out of their homes each year.

That trend returned in 2008 and 2009, but repossession figures have reduced in the years since. However, as seen above, numbers have increased in 2023.