Repossessions among Buy-to-Let properties surge 40%

The number of repossessions of Buy-to-Let (BTL) properties surged in the third quarter of 2019 compared with a year earlier, while the number of BTL properties in mortgage arrears stood at a little below 5,000. The combination of increases in repossessions and still relatively high arrears is far from a positive development for the UK’s Private Rental Sector (PRS) as it means there are potentially fewer rental homes available for the still rising number of tenants searching for one.

However, UK Finance who collate and publish the data said that the main reasons behind the increase in BTL repossessions was a technical one. Despite that, that thousands of BTL properties have fallen into arrears is perhaps even more worrying, particularly as it comes at a time when BTL mortgage interest rates remain low.

BTL repossessions

The data from trade association UK Finance show that there were 800 repossession among BTL owners on the third quarter of 2019, a 40% increase from the 570 repossessions that were recorded in the same period of 2018.

While that’s quite a large jump in the number of BTL repossessions, the actual number of 800 represents just a small proportion of all BTL properties in the UK. In addition, UK Finance said: “This increase is driven in part by a backlog of historic cases which are being processed on the same basis as the latest regulatory requirements”.

While that may be the case, a 40% rise is something that’s worthy of attention, particularly as it comes at a time when mortgage interest rates are low. And if that rise is repeated in the fourth quarter and beyond, it could prove very bad news for the UK’s PRS.

BTL arrears

While a surge in the number of BTL repossessions is bad news, perhaps even more worrying is that the number of BTL properties in arrears of more than 2.5% of the value of the property stood at 4,550 in the third quarter. While this is a little below the same period a year earlier, it’s something that could indicate that further repossessions are on the way.

UK Finance also reported that around a quarter of those BTL properties in arrears were in significant arrears, which is where the arrears total more than 10% of the outstanding mortgage balance. No reason was given for this level of significant arrears and it’s worth pointing out that the total of 1,170 BTL properties, was 1% lower than the third quarter of 2018.

While it’s not easy to identify what the main drivers of properties going into arrears, its possible that one of them could be the difficulties some landlords continue to experience with Universal Credit and the way that tenants are in control of where the rent portion of their benefit payment goes.

However, there are myriad reasons why BTL properties could go into arrears, but where that ends in repossession, it means there are fewer rental homes for the UK’s many tenants to live in.

“Arrears remain low, but with weak retail performance and worsening economic data, it’s difficult to imagine this being sustained long into the new year,” said Spicerhaart Corporate Sales managing director Mark Pilling, according to Mortgage Strategy.

“The mortgage possessions figures are concerning. UK Finance are right to point out that this stems in part from historic cases but it is nonetheless a significant jump,” Pilling added.