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“While mortgage arrears and possessions levels remained low until the end of September, there is no room for complacency.”

According to the latest data from UK Finance, mortgage arrears continued to fall to levels close to their historic lows in the third quarter.

UK Finance says the government’s time off program, which remained in place until the end of September, alongside nearly 3 million mortgage payment deferrals, has helped keep many clients out of arrears.

Overall, there was a reduction of 2,400 mortgages in arrears from the previous quarter, with a total of 74,210 homeowner mortgages in arrears of 2.5% or more of the outstanding balance.

In total, there were 25,110 homeowner mortgages in early delinquency (those between 2.5% and 5% of the arrears balance), a decrease of 5% from the previous quarter and 10% less than the same period in 2020. Unless an initial increase at the end of March 2020, these figures for anticipated arrears remained lower than those observed before the start of the pandemic.

With the end of Covid-specific support programs, UK Finance predicts that the provision by lenders of tailor-made forbearance to troubled customers “will moderate, but not prevent” the increase in anticipated arrears.

In total, there were 27,980 homeowner mortgages with larger arrears (representing 10% or more of the outstanding balance), 70 more cases than in the previous quarter. That figure has increased – from a low base – since the first quarter of 2020, although the rate of increase has slowed. These customers, who were already in relatively large arrears before the pandemic, will likely have used the full six months of the Covid scheme’s payment deferrals and are also likely to receive (or need) additional support from from lenders. custom tolerance.

Data from UK Finance shows possessions edged up in absolute terms, from a low base, as courts resolve the backlog that built up during the possessions moratorium. The possession cases currently pending before the courts are mainly those which had accumulated significant levels of arrears before the UK’s response to the pandemic began.

A total of 410 owner-mortgaged properties and 320 mortgaged rental properties were taken over in the third quarter. The number of assets is expected to increase gradually as the courts continue to deal with the backlog of cases accumulated during the moratorium period.

Eric Leenders, Managing Director of Personal Finance at UK Finance, said: “Mortgage arrears continued to fall to near all-time lows in the third quarter of the year, with the holiday scheme and the previous mortgage deferral scheme helping people and even allowing some to pay back. existing arrears.

“After the one-year moratorium on possessions ended in April 2021, there were a small number of possessions in the third quarter, but this reflected instances where people were already in financial difficulty before the pandemic. Possession is only a last resort after tailor-made support has run out, and we expect the number of cases to gradually increase as courts continue to deal with those that had been put on hold. “

David Kennedy, director of loans at Masthaven, said: “While mortgage arrears and possessions levels remained low until the end of September, there is no room for complacency. These low levels continue to reflect the impact of various government measures to support Covid, as well as the resources and energy that the mortgage sector has deployed to combat the impact of the pandemic. As the last quarter of 2021 approaches, however, the government has ended its pandemic support programs, as it has always said.

“The end of the holidays at the beginning of October could prove to be a financial blow for many borrowers in difficulty. Rising inflation, fuel shortages and further supply chain disruptions have also affected borrowers financially. These Covid-related supply chain issues, along with shortages of labor, key technologies like microchips and raw materials are expected to continue over the next year, pushing inflation further. .

“The Bank of England has yet to raise its key rate, but higher inflation levels could strain its hand. Even the smallest of rate hikes can end up rocking borrowers, especially those with low levels of financial resilience after Covid. At the same time, house prices continue to rise, which could lead to new affordability issues for potential buyers.

“Lenders must mobilize to meet these challenges. It means taking a proactive stance, identifying and reaching out to vulnerable customers before their situation escalates. The industry has responded well to the pandemic so far, but we could still face a difficult and uncomfortable end to the year. “

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