Scottish Housing Market Review – Q4 2021

Lending To Homebuyers: Arrears and Possessions

Arrears

There were 8,597 regulated mortgages that went into arrears across the UK in Q3 2021, a decrease of 7.0% (-650) on Q3 2020. As shown in Chart 4.9, following a peak of 39,556 in Q4 2008 during the financial crisis, there has been a declining trend in the number of regulated mortgages entering arrears, which has continued despite the impact of Covid-19. It should be noted that Covid-19 payment holidays were not classified as technical arrears, and thus are not reflected in these figures; however, even though these payment holidays came to the end in April 2021, this did not result in an increase in arrears. (Source: FCA)

Source: FCA

The share of lenders' outstanding regulated mortgage balances that were in arrears stood at 0.82% at the end of Q3 2021. This has remained broadly stable during the pandemic, with arrears at 0.87% at the end of Q3 2020. Chart 4.10 plots the share of lenders' outstanding balances that were in arrears by degree of severity. Arrears reported in the FCA MLAR data relate only to loans where the amount of actual arrears is 1.5% or more of the borrower's current loan balance.

Source: FCA

UK Finance data show that there were 5,670 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance across the UK in Q3 2021. This is up by an annual 5.0% (+270). This is still low relative to the period of the 2008 financial crisis. The number of buy-to-let mortgages in arrears of 2.5% or more as a percentage of the total number of buy-to-let mortgages was 0.28% as at Q3 2021, roughly equal to Q3 2020 (0.27%).

Possessions

There were 453 new regulated mortgage possessions across the UK in Q3 2021, an increase relative to Q2 2021 of 213 (89%) as can be seen in Chart 4.11. This is likely linked to FCA restrictions on possessions being lifted on 1 April 2021. However, this is significantly less than pre-pandemic levels, with possessions down by 866 (66%) relative to Q4 2019. It can also be seen that regulated and non-regulated possessions moved in a similar direction over the recent period.

Source: FCA

Guidance on evictions and repossessions

A ban on the enforcement of eviction orders in areas in Levels 3 and 4 ended on the 30 September 2021. The Coronavirus (Extension and Expiry) (Scotland) Act, passed on 24 June 2021, has extended additional protections for tenants to 31 March 2022: in particular, measures increasing the notice period for social and private evictions to 6 months in most cases, giving the First Tier Tribunal discretion when considering all grounds for eviction in the private rented sector, and requiring private landlords seeking eviction on rent arrears grounds to follow Pre-Action Requirements. The Scottish Government announced in June 2021 a £10 million tenant grant fund for councils to support tenants struggling to pay their rent as a direct result of Covid-19 and who are at risk of eviction. This is part of a package of measures available to local authorities to prevent homelessness, alongside Discretionary Housing Payments and advice on maximising income. The grants come on top of the Scottish Government's £10 million Tenant Hardship Loan Fund.

The FCA published finalised guidance for mortgage lenders in March 2021, outlining that repossessions could be enforced from 1 April 2021 but this must be in accordance with FCA guidance and regulatory requirements, which mean that repossessions should only take place as a last resort, if all other reasonable attempts to resolve the situation have failed.