UK Finance said higher rates and the cost of living were continuing to weigh on households – but said overall numbers remained low.

A growing number of homeowners and landlords are falling into arrears with their mortgages, according to new figures from a trade association.

UK Finance said there were 81,900 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2023, which was 7% higher than the previous three-month period.

There were also nearly 9,000 buy-to-let mortgages in arrears of 2.5% or more, 28% higher than in the previous quarter.

UK Finance said it came as higher rates and the cost of living continued to weigh on households.

But a spokesperson added: “Although any rise in arrears can be worrying, overall numbers remain low with less than 1% of homeowners and less than half a percent of landlords behind on their payments.”

The trade association also warned that home repossessions are likely to rise this year. It said 440 buy-to-let mortgaged properties were repossessed in the second quarter of 2023, which was 7% more than in the previous quarter.

However, the number of homeowner mortgaged properties that were repossessed fell by 19% to 610, according to the figures.

“The number of homeowner and buy-to-let possessions in [the second quarter] remain close to historic lows but are expected to continue to rise in line with our mortgage market forecast given the ongoing cost-of-living challenges,” it added.

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Myron Jobson, senior personal finance analyst at interactive investor, said: “The uptick in buy-to-let arrears is a worrying sign for the rental market…

“Landlords who are struggling financially due to mortgage arrears might try to offset their financial quagmire by raising the rent for their tenants.”

Rise in mortgage repossession claims

Meanwhile, separate figures from the Ministry of Justice showed that, across the county courts of England and Wales, there were 3,986 mortgage repossession claims between April and June, representing a 15% increase compared with the same period a year earlier.

However, this is still far below pre-COVID levels and highs reached in 2009.

There were also 22,537 landlord repossession claims, a 24% increase compared with a year earlier.

A government spokesperson said: “Home repossession is always a last resort and only a minority of evictions end up in the courts.

“Overall repossessions remain below pre-pandemic numbers but we understand the challenges people are facing and have measures in place to help, including financial support worth an average £3,300 per household.”