Recent analysis by Octane Capital has brought to light a notable rise in landlords falling into arrears, marking a substantial 93% increase within the span of a single year.

Octane Capital conducted an examination of mortgage arrears data from Q4 2023, sourced from UK Finance, shedding light on the evolving landscape. During the concluding quarter of the past year, an estimated 13,570 landlords found themselves in arrears, constituting a modest 0.7% of the overall buy-to-let (BTL) loan portfolio. However, this figure not only stands as the highest number of arrears observed in the last five years but also represents the pinnacle in terms of the proportion of total loans affected.

The escalation in BTL arrears was particularly pronounced, witnessing a 93% surge from Q1 2023, persistently rising through each subsequent quarter. Consequently, the cumulative count for 2023 reveals that 41,090 landlords faced mortgage arrears, averaging 10,273 per quarter. This reflects a substantial 76% year-on-year increase, a notable departure from the preceding year of 2022, which showed signs of easing with a 4.1% annual decline in arrears.

A parallel trend was discerned in the domain of homeowners, albeit at a less accelerated pace. The total arrears for homeowners increased by 13% in 2023 compared to 2022, marking a reversal of the previous year's annual decline of 8%. Despite this increase, homeowner arrears did not exhibit the same rapid acceleration observed in the buy-to-let sector.

In 2023, a substantial 85,028 homeowners experienced mortgage arrears, a figure eight times greater than the corresponding count for landlords.

Commenting on this concerning trend, Jonathan Samuels, CEO of Octane Capital, said "Interest rates remain at their highest since 2008, and it’s clear that while we haven’t seen the base rate increase since August of last year, both landlords and homeowners alike are struggling to keep pace with the increased cost of their mortgage."

He further emphasized the concern arising from the significant surge in landlord arrears, particularly in the context of the rental sector's existing shortage of available homes. Samuels stated, "An increase in buy-to-let arrears suggests that this issue could be set to intensify as landlords offload their portfolios to pay their debts, or worse, see them repossessed."