Data from Pepper’s portfolio of more than 100,000 mortgages shows that arrears fell for the third consecutive quarter in Q4 2025.

Overall arrears were down by 1.1% quarter-on-quarter.

Within the total, residential arrears dipped by 0.9% and buy-to-let arrears fell by 10.4%.

Arrears eased across most UK regions, with the exception of London, where they rose by 0.6%, and the South West, which saw a 2.1% increase.

Younger borrowers aged between 21 and 40 experienced arrears growth from a low base, while arrears among borrowers aged 41 and over continued to decline, Pepper found.

The data also shows early indicators of borrower stress remained largely stable as direct debit rejections rose by 0.7% in Q4.

New mortgage originations increased by 1.9% in Q4 2025, following a strong rebound in the previous quarter to reach their highest level since Q4 2022.

Pepper Advantage UK managing director Aaron Milburn says: “Arrears have now fallen for a third consecutive quarter and new lending has returned to levels not seen since 2022, which is the strongest indication so far that the UK mortgage market is beginning to stabilise.

“While our data points to a more resilient mortgage market heading into 2026, households remain cautious.

“The outlook is still uncertain and shifts in inflation, interest rates or wider economic conditions could quickly change the current trajectory.”