Mortgage possessions jumped by more than half in the last three months of last year from 12 months ago, as regulators warn parliament that these levels will rise if lending restrictions are eased.
Homeowner possessions lifted by 54% to 1,030 in the fourth quarter of 2024 and were up 12% on the previous three months, according to UK Finance data.
It adds that landlord possessions, at 700 in the fourth quarter, are up 30% from a year ago, but unchanged from the previous quarter.
The banking body says combined homeowner and buy-to-let possessions in the fourth quarter of 2024 are 87% lower than the 13,200 possessions seen in the first quarter of 2009 in the aftermath of the financial crisis, and 13% lower than the 1,990 seen in final 2019, before the pandemic.
However, the rise in possessions comes as the Financial Conduct Authority and the Bank of England warn that loosening key mortgage restrictions, such as loan-to-income levels will lead to higher possessions.
Last week, Bank of England governor Andrew Bailey said “a public debate” is needed over the trade-off between higher repossessions and more people entering the mortgage market as a result of lower stress tests.
However, today’s UK Finance data also shows that there were 92,170 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the fourth quarter of 2024, a 2% fall from the previous quarter.
It adds that there were 12,610 BTL mortgages in arrears of 2.5% or more of the outstanding balance in the fourth quarter, a 3% drop on the previous quarter.
Target Group sales and growth lead Melanie Spencer says: “Last quarter, the volume of arrears cases was falling and they’re still going in the right direction.
“With the UK set for a series of base rate cuts this year, borrowing pressures should ease. Increased government spending announced at the October Budget should also drive growth supporting borrowers. Theoretically, cases should reduce.”
Phoebus Software chief of sales and marketing Richard Pike adds: “As the economic landscape remains at best flat, maintaining control of arrears levels will be crucial. An interest rate cut this afternoon would provide much-needed relief for borrowers on variable rates.
“The effect of loosening of originations criteria by some lenders will take some time to flow through to portfolio performance.”
UK Finance director of mortgages points out: “The number of mortgages in arrears has seen a slight decrease compared to the previous quarter.
“Having peaked in the first quarter of 2023, arrears appear to now be on a confirmed downward trend.
“This reflects the fact that, while pressures remain, the challenges of higher interest rates and cost of living increases have begun to ease.”
