Arrears in the buy to let sector are worsening at a faster rate than for homeowners.

Octane Capital analysed industry figures on the number of mortgages that have fallen into arrears by 2.5 per cent or more of the mortgage balance, comparing the split between the BTL and residential sectors and how each compares to the pre-pandemic market. 

Cases of buy to let arrears of more than 2.5 per cent the loan amount have risen by 42.6 per cent in four years, rising from 4,930 in Q1 2019 to 7,030 in Q1 2023.

Over the same period cases of arrears for homeowners of more than 2.5 per cent have actually declined by 8.6 per cent from 83,870 in the first quarter of 2019 to 76,630 in the equivalent quarter this year.

Octane says this suggests that fewer landlords are being shielded from the current economic climate, with both mortgage rates and energy prices increasing at a faster rate than rents.

Overall it’s more common for residential homeowners to struggle however.

In the first quarter of this year there were some 76,630 homeowners in arrears of 2.5 per cent or more of their mortgage balance. While small, this accounted for 0.87 per cent of total homeowner loans outstanding.

This proportion has hovered around this mark for the past four years, peaking at 0.94 per cent during the first quarter of 2021.

In contrast, the number of landlords in arrears of 2.5 per cent or more of their mortgage balance totalled 7,030 during Q1 of this year and accounted for 0.34 per cent of total outstanding buy to let loans. 

While this proportion is more than half that of owner-occupiers, it is the highest total number seen since Q1 2019, as well as the highest proportion of all BTL loans with the exception of Q4, 2022, when it also sat at 0.34 per cent.

Octane chief executive Jonathan Samuels says: “It’s striking that buy to let landlords are becoming less shielded over time from the economic conditions, suggesting they are unable to entirely recoup their lost income in the form of higher rents.

“The Chancellor’s mortgage forbearance measures are designed to reassure people who are worried about the impact of rising rates, and it’s welcome these measures have been introduced before the horse has bolted – cases of arrears need to be tackled before people fall into trouble.

“We’d still recommend mortgage holders to keep paying their loans as normal unless they are in need of emergency action, as measures like interest-only loans will only result in higher payments down the line to compensate.”