UK residential mortgage arrears drop but buy-to-let still under stress
There are fewer people missing payments on their residential mortgages in the UK, according to the latest data from Pepper Advantage, a credit intelligence company.
Residential mortgage arrears were 0.8 per cent lower in the third quarter relative to the previous three months, based on an analysis of a portfolio of over 100,000 mortgages Pepper Advantage conducted. However, in the third quarter, the arrears rate for buy-to-let mortgages increased nearly 10 per cent.
Overall, the percentage of UK mortgages where a payment has been missed grew by only 0.1 per cent in the third quarter of the year, which is the lowest level recorded since the same period in 2022. Although arrears have plateaued, new originations also fell 7.6 per cent quarter-on-quarter.
Despite a general improvement across the different regions, there are still challenges ahead with the macroeconomic environment putting stress on borrowers. The percentage of residential mortgages that had a direct debit rejection in the quarter grew 1.9 per cent, up from a 0.4 per cent growth in the second quarter. Meanwhile, for buy-to-let mortgages the growth rate was 2.7 per cent.
Read more: Property market begins “muted” recovery as mortgage arrears slow
Greater London recorded its lowest increase in arrears overall at only 0.4 per cent, down from six per cent in the previous quarter.
“Looking to 2025, the data also shows headwinds clearly remain and the signs of structural challenges in the buy-to-let market are cause for concern with a knock-on effect for renters,” commented Aaron Milburn, UK managing director for Pepper Advantage.
“Private landlords with BTL mortgages continue to exit the market as they grabble with the entrenched higher rate environment and the potential for additional taxes, increasing supply-side pressures and pushing up rental prices. Time will tell whether this divergence develops into a wider trend, but we’ll be following the data closely as we continue to support borrowers through difficult circumstances.”
Read more: Buy-to-let arrears worsening at faster rate than owner-occupied mortgages
Read more: Rise in buy-to-let mortgage arrears blamed on Covid-19 and worsening economy
