Home repossessions rise as higher interest rates bite borrowers
The number of homeowners with mortgages facing repossession rose in the fourth quarter of 2024 as buyers struggled with higher interest rates.
UK Finance figures show that repossessions rose 12 per cent in the last three months of 2024 compared to the previous year and were up 54 per cent yearly. Overall, 1,030 residential houses were taken over.
Buy-to-let mortgage repossessions rose 30 per cent year on year to 700 in the quarter. Both are low compared to historic norms.
The level of homes in arrears remains low, at 1.06 per cent of homeowner mortgages and 0.65 per cent of buy-to-let home loans.
In the fourth quarter of 2024, there were 92,170 homeowner mortgages in arrears. This was a two per cent decrease compared with the third quarter of 2024.
The number of buy-to-let mortgages in arrears also fell, down three per cent compared with the previous quarter, to 12,610.
The worst quarter for mortgage arrears was the first quarter of 2009, during the global financial crisis. A total of 209,600 homes fell behind on payments.
Charles Roe, director of mortgages at UK Finance, said: “The number of mortgages in arrears has seen a slight decrease compared to the previous quarter. Having peaked in Q1 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.
“This is good news for customers, but we know that this will not be the case across all households, and lenders will support anyone who might be struggling.”
Melanie Spencer, sales and growth lead at Target Group, said: “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.”
UK Finance said that lenders’ affordability stress tests ensure borrowers can keep up with their mortgage payments, even if their interest rates increase above what it was before taking out their mortgages.
However, last week, Bank of England governor Andrew Bailey said “a public debate” was needed over higher repossession levels and plans for more relaxed stress tests that would mean more people can afford mortgages.
Chancellor Rachel Reeves met with financial regulators in January to explore whether lenders’ financial rules can be loosened.