With higher interest rates over the past two years, the increase in mortgage rates is having an impact on both rented and owner occupied properties.

Repossessions are higher than a year ago

Recent research by UK Finance showed that 700 buy-to-let mortgaged (rental) properties were repossessed in the fourth quarter of 2024 - 30% higher than the same period a year earlier. In addition, 1,030 homeowner-mortgaged properties were repossessed in the fourth quarter of 2024 - 54% higher than the same period a year earlier. Whilst the overall number of repossessions is still relatively low (1,730 in the last 3 months of 2024) there is general concern that this number will continue to rise.

Why would a property be repossessed?

Failure to keep up with mortgage repayments can lead to a property being repossessed - whether this happens to be owner occupied or where a property is rented out.

With mortgage rates close to their highest levels for years, some landlords are facing a tripling or even quadrupling of their mortgage repayments.

In some instances, the amount that a landlord can borrow might even be lower than the current mortgage. In this situation, the owner (landlord) not only has to pay a higher rate of interest, they would also have to pay back some of the mortgage when the time comes to re-mortgage.

What might a landlord do to avoid repossession?

Increasing the rent may be one way of avoiding a repossession, but even that might not be enough. With changes in legislation on their way together with facing increased costs, landlords are continuing to sell their properties, and the number of properties available to rent also continues to fall. .

Will the landlord or letting agent tell me if the property is likely to be repossessed?

In short, there is no obligation for a landlord or letting agent to speak to you if the mortgage payments are in arrears. Indeed, the letting agent might not even know there is an issue.

What is the process of repossession?

The mortgage lender can start court proceedings if the landlord owes money on their mortgage.

The lender must also send a letter to the property which will be addressed to ‘the tenant or the occupier.’ If you get a letter addressed in this way, you should always open it and not assume it is junk mail. This letter will tell you where and when a court hearing will take place. You should look to take part in the repossession hearing and more information can be found here. If your landlord has a buy to let mortgage, or has an agreement with the mortgage company that states the mortgage company would take over the tenancy if the property was repossessed, you could remain in the property for the remainder of your tenancy.

What happens if the property is going to be repossessed?

You could delay the eviction process for up to 2 months, but if you are facing this situation it may be in your interests to seek help with the likes of Shelter and further information can be found here.

Can I be evicted if the property is repossessed?

If you have a ‘binding tenancy’ then your tenancy continues after the property is repossessed by the lender. A binding tenancy could apply if your landlord has a buy to let mortgage or your tenancy started before the mortgage was taken out. In this situation you become the mortgage lender’s tenant and they will need to take out separate action in order to end your tenancy.

Dialogue with your landlord or letting agent

No-one likes a shock, so it may be worth talking to your landlord or letting agent given the current market situation. Whilst there is no obligation for them to talk to you about the financial position of the property, there is no harm in asking the question.

Summary

Given the current market conditions there is a lot of uncertainty around the rental sector. Rents are at an all time high, landlords are selling properties in their droves and repossessions are slowly increasing, albeit from a low level. As a starting point you may wish to speak with your landlord or letting agent to get some initial clarity on your situation.

Remember, CreditLadder can help you improve your credit score.

CreditLadder is the UKs first and biggest rent reporting company and can help you improve your credit score and credit position across the three main Credit Reference Agencies in the UK, namely Experian, Equifax and TransUnion. Improving your credit score has lots of benefits including helping you access finance at better rates - this can also save you money.

CreditLadder also runs afree mortgage application service in partnership with Tembowhich will tell you how much you could borrow.

Remember the content provided in this article is for information purposes only and should not be considered as advice.