The struggling economy has increased mortgage arrears among landlords by nearly 30%, latest data from lenders’ trade body UK Finance has revealed.

Its latest update reveals that 11,540 buy-to-let mortgages are in arrears of 2.5 per cent or more of the outstanding balance in the third quarter of 2023, 29 per cent greater than in the previous quarter.

Within the total, there were 6,270 buy-to-let mortgages in the lightest arrears band (representing between 2.5 and 5 per cent of the outstanding balance).

This was 33 per cent greater than in the previous quarter and three times the percentage of homeowner mortgages in arrears in the same circumstances.

But repossessions of landlords’ properties remain static, helped by the rules agreed with lenders by the Government in March that give borrowers in difficulty a 12-month ‘breathing space’.

Consequently, over the past three months some 450 buy-to-let mortgaged properties were taken into possession, unchanged from the previous quarter.

Reaction

Ben Beadle, Chief Executive of the NRLA (pictured) says: “With the demand for rented housing massively outstripping supply, we need a healthy and vibrant private rented sector. Today’s figures from UK Finance are therefore extremely worrying.

“The Chancellor needs to undo the damage done by tax hikes on the sector and reinstate mortgage interest relief in full for the private rented sector.”

Commenting on Newspage, Craig Fish (pictured), director at London-based broker, Lodestone Mortgages & Protection, predicts a tough time ahead for landlords with mortgages: “The buy-to-let sector has been hit harder than any of late.

“As if the taxation changes weren't bad enough, we now have higher interest rates and stress testing causing untold pain.

“When it comes to remortgaging, many landlords are finding that they are unable to do so, due to insufficient rental income and are having to stick with their current lender on higher-priced products.

Adam Oldfield, chief revenue officer at financial software firm Phoebus, says: “When you consider that lenders had to stress test borrowers up to eight per cent for almost all of the mortgages in existence today, the question is why is this happening?  

“The answer, unfortunately, is most likely that the ultra-low interest environment that we have experienced over the last few years has led to a level of complacency.  

“The rising cost-of-living and higher interest rates has come as a massive shock to many and budgeting for higher costs is not something borrowers have had to do for a very long time.”

Graham Cox, founder at Bristol-based Self-Employed Mortgage Broker, adds: “The level of landlord arrears shows just how unsustainable current rent levels are. Void periods are increasing as tenants jump ship, moving in with family or friends or into cheaper accommodation where available. Unless the UK gets house building, this mess will probably only get worse.”