The number of households falling into arrears continued to rise in the first quarter as rising interest rates continued to hit borrowers.

According to figures from industry body UK Finance, arrears picked up in the first quarter with mortgages in arrears of more than 2.5% reaching 76,630, up 2% quarter-on-quarter.

Of this, 27,700 mortgages were in the lightest arrears category, between 2.5% and 5%, which is 5% higher than the previous quarter.

Lee Hopley, UK Finance’s director of economic insight and research, said the rise in arrears reflected “the increased cost-of-living weighing on households’ incomes”.

The figures reinforce recent Financial Conduct Authority data that revealed arrears increasing in Q1 2022 for the first time since early 2021.

Repossessions also rose 50% in the first quarter, with 750 homeowner mortgaged properties repossessed.

In addition, 410 buy-to-let mortgaged properties were taken into possession, 28% higher than the previous quarter, as rising interest rates and a tax crackdown hammer landlords.

In addition, there were 7,030 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of 2023, 16% higher than in the previous quarter.

Within the total, there were 3,420 buy-to-let mortgages in the lightest arrears band (representing between 2.5% and 5% of the outstanding balance). This was 33.1% greater than the previous quarter.

However, Hopley said that while borrowers are increasingly feeling the pain of the Bank of England’s rate hikes, the figures were still relatively low.

“While the number of repossessions increased, it’s important to note that this is from a very low base as historic cases make their way through the courts. The total number of possessions remains significantly below the levels seen prior to the pandemic,” he added.

“As the cost of living challenges persist, customers may find themselves struggling with a range of bills including their mortgage.”