UK Finance has published its Q2 figures. Possessions fell year on year for the first time since late 2003. Homeowner arrears are down 1% on the quarter and buy to let arrears down 6%.
Read quickly, that says the pressure has come off. One line further down puts a limit on that reading: more than two thirds of possessions relate to mortgages arranged at least a decade ago.
That is the definition of a lagging indicator. It reports on loans written in a different rate environment, stress-tested against different assumptions, and on what became of those borrowers over ten years. It is accurate, it is reliable, and it tells you nothing about what is happening now.
Put a leading indicator next to it. Our own figures show the national average time from listing to sold subject to contract moving from 77 days in Q1 to 66 days in Q2, a 14% shift inside a single quarter. Numbers like that move every week, because they record buyers making decisions today.
Both figures are correct. They answer completely different questions. A lagging indicator tells you how the last cycle ended. A leading one tells you where this one is going. Treating the first as the second is the easiest way to misread this release, and the misreading runs in the direction that makes you relax.
The practical version, if you hold rental property: take the remortgage rate you would actually be offered today, run it through your own portfolio, and see which assets still stand up. The rate you are paying now is not the one to test against.
None of those borrowers appear in the arrears data yet, because they haven't reached maturity. Deal with the ones that don't stand up while there is still a market and time to act.
Co-founder of Propalt and a property investor and developer for 20 years
