The cost-of-living crisis is taking its toll on households, leading to a significant rise in repossessions, according to the latest figures from UK Finance, the lender trade
body. In the first quarter of 2023, there were 750 homeowner mortgaged properties taken into possession, marking a 50% increase compared to the previous quarter. Additionally, 410 buy-to-let mortgaged properties were repossessed, showing a 28% increase from the previous quarter.
The report also reveals that there were 76,630 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of 2023, representing a 2% increase from the previous quarter. UK Finance attributes these numbers to the rising cost of living, increasing interest rates, and the end of government support for energy bills. The organization acknowledges the growing number of households facing early arrears but urges against panic. Lenders have been providing tailored forbearance to nearly 200,000 borrowers who are unable to meet their full mortgage payments over the past year.
The data has drawn criticism from industry professionals, with Samuel Mather-Holgate, Managing Director of Mather & Murray Financial, expressing disappointment in the Financial Conduct Authority and the Bank of England. Mather-Holgate believes that the affordability stress tests employed by these institutions have proven ineffective in light of rapidly rising interest rates. He holds the Bank of England responsible for the distress and crisis unfolding in the housing market.
Adam Oldfield, Chief Revenue Officer at Phoebus Software, echoes concerns about the future. With approximately 370,000 borrowers transitioning from fixed-rate deals between April and June, it is expected that the trend of repossessions will persist and potentially worsen. Oldfield suggests that if the Bank of England continues to raise the base rate, the situation is likely to deteriorate further.
The increasing number of repossessions highlights the challenging financial circumstances faced by homeowners and the potential impact of rising interest rates on their ability to meet mortgage payments.