Homeowners under pressure as possessions rise 

Falling Arrears, Rising Possessions

The mortgage market is sending out mixed messages. UK Finance data reports the number of mortgages in arrears of more than 2.5% has fallen by 3% over the past year, helped by lower interest rates and lender forbearance. But Ministry of Justice figures reveal possession claims jumped 22% compared to last year. Debt charity StepChange says its clients in arrears now owe an average £11,531 - almost double the level in 2023.

“Whilst interest rates are coming down, along with mortgage arrears, many are still struggling” said Adam Butler, Public Policy Manager at StepChange. “With possessions rising, we are concerned that those in debt could be pushed further into crisis.”

Vulnerability  

Industry experts say the rise in possessions reflects deeper borrower vulnerabilities. Andrew Gething, Managing Director of MorganAsh said that most people in arrears also face compounding health or lifestyle challenges. “To provide the right type of support, firms need to understand these wider vulnerabilities,” he said, adding that technology will be a key to managing mortgage books at scale.

Rates and Resilience Outlook

While arrears are down, the broader outlook is uncertain. Nick Hale, CEO of Movera, warned that hopes for another interest rate cut this year may now be misplaced. “It’s not all doom and gloom for those looking to enter the housing market,” he said. “But as progress hangs in the balance, resilience and digitalisation will be key.”

House prices are also rising again, with the North East seeing some of the sharpest growth. Maria Harris, Chair of the Open Property Data Association, cautioned that while higher values benefit existing owners, affordability pressures are growing for first-time buyers and lower-income households.

Risks ahead and lessons from the past

Despite the pressure, today’s market is still more stable than in 2009, when nearly 49,000 homes were repossessed compared with just over 1,100 this year. Stronger bank balance sheets, more fixed-rate borrowing and greater forbearance mean the system is more resilient.

But risks remain. Around 3.6 million households are due to refinance by 2028, many onto higher rates. If inflation stays sticky and rate cuts are delayed, refinancing shocks could hit harder - and repossessions could climb further, particularly in already stretched regions.

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