The cost of renting out properties and high interest rates have pushed up the number of buy-to-let (BTL) mortgages in arrears.

UK Finance reports that while homeowner mortgages in arrears increased by 7% to 93,680 in the last quarter of 2023 compared with the previous quarter, buy-to-let mortgages in arrears increased by 18% to 13,570. It classifies this as when arrears reach 2.5% of the outstanding balance.

As a result, 540 homeowner mortgaged properties were repossessed in Q4, down 14% on the previous quarter, while 500 buy-to-let mortgaged properties were repossessed in Q4, up 11%.

Hit twice

Mortgage Finance Brokers MD Gavin Richardson (pictured) says the 18% increase in BTL arrears illustrates how landlords are being hit twice by rising costs. “Like all of us, their own bills and expenses have increased, and then financially stretched tenants miss rent, meaning they’ve got to try and find the cash to cover the BTL mortgage,” he tells LandlordZONE.

While all landlords anticipate and plan for some missed rent payments, there’s only so much you can do in today’s economic environment, says Richardson. “Those with smaller portfolios are likely the worst hit, as there’s less rent to cover shortfalls if multiple tenants are in arrears.”

UK Finance says falling mortgage rates will help ease the payment shock for the 1.5 million homeowners and 230,000 BTL mortgage holders whose fixed rate deals end this year.

Richardson advises anyone with an upcoming remortgage not to leave it until the last minute. “Most lenders allow you to fix your next mortgage rate up to six months before your ERC period ends, and some will let you change your rate for a lower one if rates reduce before completion,” he adds.

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