Are UK Landlord Mortgages Really Falling into Arrears?
Earlier in November 2023 the news headlines said that the numbers of UK homeowners and landlords with mortgages are falling into arrears is increasing. In particular Buy-To-Let landlord arrears had jumped 29% month on month.
This prompted us to take a closer look at the source of the headlines, trade group UKFinance. Their press release and forecast data painted a picture that was more balanced than the reposts and headlines led to believe.
Yes arrears are increasing but compared to the 2008 global economic turmoil, we are long way off the peak with close to 100,000 mortgages in arrears today versus the 2009 peak of 200,000.
UKFinance also forecasts possessions – a better indicator of market pain. For 2023 they are forecast to total 7,300 which is way below the 2009 peak of more than 30,000.
Figure 1: Total customers in arrears (incl. BTL)
Figure 2: Possessions forecast (incl BTL)
BTL landlords had a total of 11,000 mortgages that were in arrears, last month, compared to home-owner arrears of 88,000. Only 450 properties were taken into possession last quarter.
BTL landlords are seeing an increase in arrears at a faster rate than homeowners. But compared to the overall market and volume it is unlikely to move the needle with material market changes.
Landlords falling into arrears have the potential to pass on increases to tenants. Limited information is provided as to why these mortgages are in arrears. For example, they may be property specific reasons that prevent rental.
Conclusion: the trend of BTL landlords increasing in arrears is ticking up, but it is a small percentage of the total market and unlikely to change overall buy/sell/rent dynamics.
Landlords are undoubtedly finding it harder to cover their costs but landlords look to be a very small percentage, plus repossession rates are unlikely to get anywhere close to the 2009 peaks again.
Sources: UKFinance Nov 2023
https://www.ukfinance.org.uk/news-and-insight/press-release/mortgage-arrears-and-possessions-q3-2023
