Increasing number of buy-to-let investors in arrears

There were 5,100 buy-to-let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the fourth quarter of 2017, 2 per cent greater than in the same quarter of the previous year.

Within this total there were 1,200 buy-to-let mortgages with more significant arrears representing 10 per cent or more of the outstanding balance.

This was 20 per cent more than in the same quarter of the previous year.

The number of buy-to-let properties in arrears of more than 2.5 per cent of the balance has been going up for several quarters since the last three months of 2016 following a long period of declining.

Meanwhile the number of buy-to-let properties with arrears of more than 10 per cent of the balance has also been going up recently.

Despite this 600 buy-to-let mortgaged properties were repossessed in the fourth quarter of 2017, which was unchanged from the same quarter of the previous year.

The trend follows the introduction of a 3 per cent stamp duty surcharge for additional property purchases in April 2016 and the announcement that income tax relief for landlords would be gradually phased out by 2020, starting in April 2017.

A further blow came with the Prudential Regulation Authority’s (PRA) introduction of more stringent affordability rules on 1 January this year, followed by stricter underwriting guidelines for portfolio landlords brought in by the end of September.

Since the changes were introduced, it has been reported that one in five landlords were considering selling their properties.

For homeowners, things are looking more positive as annual home repossessions reached their lowest level in 36 years.

Meanwhile overall arrears have continued to decline, with 82,800 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance in the fourth quarter of 2017.

This is 7 per cent fewer than in the same quarter the previous year.

The figures showed 1,100 homeowner mortgaged properties were taken into possession in the fourth quarter of 2017, 8 per cent fewer than in the same quarter of the previous year.

Paul Smee, head of mortgages at UK Finance, said: "Annual homeowner possessions currently stand at a 36-year low, with overall arrears and possessions continuing to decline.

"This reflects the mortgage industry's continued commitment to appropriate and prudent lending."

"All potential borrowers are carefully assessed against their ability to pay back their loans, and lenders work closely with their customers to ensure that any payment issues are dealt with at an early stage."

There were 24,700 homeowner mortgages with more significant arrears representing 10 per cent or more of the outstanding balance. This was 1 per cent fewer than in the same quarter of the previous year.

damian.fantato@ft.com