Hello Readers,

You may recall that I recently wrote an article about how we’ve started to see an increase in sellers looking for a quick sale as the cost of living crisis starts to bite and hand in hand with this goes an increase in rental arrears along with repossessions.

But, before I get onto those I was interested to hear how the sales market seems to be differing in terms of ‘hotness’ across the country.

For example, some sales agents I have been speaking with in lower priced areas above the M25 have seen only a marginal change in the sales market whilst those in higher priced areas such as London and the South East are noticing a real significant drop in sales volume as such as it’s starting to damage their business models.

This division probably comes as no surprise where the higher priced areas tend to require a larger mortgage which will, in today’s climate, require a significantly higher monthly mortgage payment than a year ago.

I’ve particularly been interested in a handful of articles that I’ve come across which highlight a mixture of an increase in arrears, repossessions and finally… a drop in mortgage rates!

An Increase In Mortgage Arrears

The latest Government data on arrears and possessions of property linked to first charge mortgages highlight how the number of mortgage-holders getting into arrears rose in final months of 2022.

If you look at this data, the increases are 1% on the previous quarter for homeowners and 5% for buy to let mortgages (probably no surprise)! The key headlines re below:

• There were 75,170 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance in the fourth quarter of 2022, 1 per cent greater than in the previous quarter
• Within the total, there were 28,390 homeowner mortgages with more significant arrears (representing 10 per cent or more of the outstanding balance). This was 2 per cent fewer than in the previous quarter
• There were 6,060 buy-to-let mortgages in arrears of 2.5 per cent or more of the outstanding balance in the fourth quarter of 2022, 5 per cent greater than in the previous quarter
• Within the total, there were 1,770 buy-to-let mortgages with more significant arrears (representing 10 per cent or more of the outstanding balance). This was 1 per cent fewer than in the previous quarter

An Increase In Repossessions

Although low level at the moment, the latest MoJ (Ministry of Justice) figures for October to December 2022 report that mortgage possession claims increased by 23% in Q4 compared to Q4 2021 from 2,570 to 3,160.

But it doesn’t stop there as repossession orders saw a rise from 1,650 to 2,482 (50%) and the number of warrants climbed from 1,121 to 2,112 (88%), while repossessions by county court bailiffs saw a 134% increase from 313 to 733.

This is quite staggering when you look at the percentages, but with it comes to the numbers you’ll see how it’s relatively low level. It’s probably no surprise however, that the challenging economic times have clearly started to lead to people losing their homes.

I’ll leave you with this shocking data about landlord possession actions as for Q4 compared to the same quarter in 2021, claims increased in Q4 2022 from 14,436 to 20,460 (42%), orders from 6,865 to 16,158 (135%), warrants from 4,285 to 8,717 (103%) and repossessions from 2,729 to 5,409 (98%).

For landlords, these figures do come as a stark reminder of how tenant’s circumstances can change overnight however, but when it comes to tenant circumstances, obviously the negative impact could be on rental income leading to the landlord struggling to pay a mortgage!

A Drop In Mortgage Rates

Spread over the backdrop of a challenging property market is a drop in mortgage rates.

Speaking with my finance partners, they have their work cut out as it appears mortgage companies are locking horns in a ‘fierce price war’ as rates drop!

As of 7^th February, average mortgage rates were as per the below for homeowners and my question for you is what stands out? To me it’s that rates are significantly below the 6% mark we were at not that long ago – check out the rates from Martin Lewis below:

Ok, so these may be for homeowner mortgages but it’s certainly a positive sign of the direction of travel. I certainly think that the next six months could be interesting!

What can we, as investors learn from this. I think that we need to keep reminded of how temporary the challenges are likely to be and as the year progresses, investors will want to strengthen their position ready to invest again as soon as that opportunity comes up.

Does anything about this stand out to you? I’d be interested to hear and particularly whether this affects your direction of travel for your investment journey in 2023/24!

Hasan