The number of mortgage holders who have fallen significantly behind on their repayments has increased by 18% over the past 12 months, fresh data shows.

According to UK Finance, 87,930 homeowner mortgages were in arrears during the third quarter of the year – up 7% on the previous three months but still running at less than half the number seen in 2009 following the financial crash.

It noted a leap in the number of buy-to-let (BTL) mortgages in arrears, rising 29% over the same period to just over 11,500, owed largely to the sharp rise in interest rates.

“The increases in arrears are driven by the combined impact of both cost-of-living pressures and higher interest rates,” its report noted.

“In particular, interest rate pressures are felt more acutely in the BTL sector, where landlords may not be able to raise rents to cover the increases in their payments.”

Reflecting on the data, Adam Oldfield, chief revenue officer at Phoebus Software, said “Put into perspective the number of mortgages in arrears accounts for just 0.93% of all homeowner mortgages.  However, the rate at which arrears is increasing is the worrying statistic that is unlikely to fall in any time soon.

“As worrying as this increase may be to many, the number of possessions fell.  This shows the increased forbearance that lenders are showing to struggling borrowers.

“When you consider that lenders had to stress test borrowers up to eight per cent for almost all of the mortgages in existence today, the question is why is this happening?  The answer, unfortunately, is most likely that the ultra-low interest environment that we have experienced over the last few years has led to a level of complacency.

“The rising cost-of-living and higher interest rates has come as a massive shock to many and budgeting for higher costs is not something borrowers have had to do for a very long time.  No-one, especially lenders, wants to repossess homes.  It’s expensive, horribly upsetting and disruptive.  So, lenders will again be looking to do everything they can to avoid taking more homes into possession in the coming months.”

Charlotte Nixon, mortgage expert at Quilter, commented: “Navigating through the financial headwinds of the current economic climate, homeowners and renters are confronting stark realities, with increasing legal actions reflecting a surge in housing insecurity.

“Mortgage possession actions, indicative of lenders seeking to recover properties from borrowers who have fallen behind on payments, have escalated. Specifically, mortgage possession claims, which are initial filings by lenders to obtain court permission to foreclose on properties, increased by 14% to 4,185.

“This uptick is a clear signal of the rising financial pressure on homeowners. Meanwhile, mortgage possession orders, the court’s judgment that lenders may proceed with foreclosure, have risen by 18% to 2,923, underscoring the gravity of the situation for those struggling to pay their mortgages.

“However, in a contrasting trend, actual repossessions, have decreased by 18% to 622. This suggests some homeowners are finding ways to avert the final act of losing their homes, possibly through renegotiated payment arrangements or other forms of assistance. Potentially initiatives like the Mortgage Charter have helped to decrease repossessions providing a sliver of hope that there may be a growing cushion against the ultimate displacement from one’s home, despite the uptick in initial legal proceedings.

“Renters are not faring much better, with landlord possession actions indicating a more straightforward trajectory towards housing insecurity. Landlord possession claims have seen a significant upswing of 19% to 24,938, and repossessions executed have climbed by 11% to 6,080. These numbers are not just statistics; they represent individuals and families grappling with the possibility of losing their homes amidst the crunch of higher rents and higher bills.

“These figures represent the heightened financial distress that is becoming increasingly widespread across regions, with possession claims rising in every area. London stands out with the highest rates of both private and social landlord claims, a testament to the acute cost pressures in the capital.

“It is crucial for those at risk of falling behind on mortgage or rent payments to seek advice, engage with financial support services, and explore every option to maintain their housing security. The message is always don’t bury your head in the sand; seek help.”