The latest data from UK Finance has revealed that mortgage arrears fell to a new record low during Q1 this year, 8% fewer than in the same period a year ago and the lowest level since 1994 when records began.
According to the figures, there were 78,800 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of 2018.
Within the total, there were 24,100 homeowner mortgages with more significant arrears (representing 10% or more of the outstanding balance), 3% fewer than in the same quarter of the previous year.
There were 4,500 buy-to-let mortgages in arrears of 2.5% or more, 6% fewer than in the same quarter of the previous year. 1,200 homeowner mortgaged properties were taken into possession in the first quarter of 2018, unchanged from the same quarter of the previous year.
However UK Finance has raised concerns that the recent changes to Support for Mortgage Interest from a benefit to a loan, as well as any further rate rises, "risk causing a reversal of this trend".
Jackie Bennett, director of mortgages at UK Finance, commented: "The number of mortgages in arrears is at its lowest level since records began while possessions remain at a historic low. This has been helped by low interest rates and lenders supporting borrowers through periods of temporary financial difficulty wherever possible.
However, the recent change to Support for Mortgage Interest from a benefit to a loan, as well as potential pressure on households from a future base rate rise, risk causing a reversal of this trend as the year goes on. 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 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, says: "Mortgage arrears are at a record low, which is encouraging.
Yet there is no room for complacency. Possessions may be declining but that can change and 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."