The number of home owners with mortgages in arrears has hit an all time low, lenders say.

Data from banking trade body UK Finance shows there were 78,800 home owner mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of 2018, 8% fewer than in the same quarter of the previous year and the lowest level since records began in 1994.

Within the total, there were 24,100 home owner mortgages with more significant arrears of 10% or more, which was 3% lower than the same quarter of 2017.

There were 4,500 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance in the first quarter of 2018, 6% fewer than in the same quarter of the previous year, however, the number of those with arrears of more than 10% was up 10% annually to 1,100.

Jackie Bennett, director of mortgages at UK Finance, said: “The number of mortgages in arrears is at its lowest level since records began while possessions remain at a historic low.

“This has been helped by low interest rates and lenders supporting borrowers through periods of temporary financial difficulty wherever possible.

“However, the recent change to Support for Mortgage Interest from a benefit to a loan, as well as potential pressure on households from a future base rate rise, risk causing a reversal of this trend as the year goes on.

“Only a small minority of those eligible for the SMI loan have taken it up so far. Lenders will proactively help borrowers to see if there are other ways to make up their payments if they do not want to take out the loan.

“As ever, customers should not hesitate to contact their lender if they anticipate any payment problems and want to discuss what options are available.  Repossession is always a last resort.”

Mark Pilling, managing director of Spicerhaart Corporate Sales, said it was encouraging to see that arrears are at an historic low, but also warned the tide could change.

He said: “Many of those who took out interest-only mortgages are coming to the end of their terms with no way of paying off the capital. And with house prices falling in many regions, they will find they have less equity in their homes than they had hoped. This could cause problems as they try to sell or remortgage to pay off the debt.

“There is also the SMI issue. Last month, the SMI benefit stopped and was replaced by a loan. Around 124,000 home owners were part of that scheme, and only a small number have signed a new loan agreement, so will have lost their payments. This could mean that thousands of home owners may struggle to make their mortgage repayments in the coming months, with many even going into arrears.

“With this in mind, combined with the threat of a base rate rise and the fact wage growth remains stagnant, lenders need to be keeping a close eye on their clients’ ability to keep up their repayments and engage with third parties to look after every borrower’s best interests.”