Mortgage arrears fell 3% in the second quarter of this year, while possessions rose marginally.

The latest figures from UK Finance found homeowner mortgage arrears of 2.5% or more of the outstanding balance stood at 87,380 in the second quarter.

Of these, there were 29,840 homeowner mortgages in the lightest arrears band, between 2.5% and 5% of the outstanding balance), also 3% fewer than in the previous quarter.

Buy-to-let (BTL) arrears dropped 5% to 11,270, with 4,100 of these in the lightest arrears band, a 6% fall from Q1.

Overall, arrears remain low as a share of total mortgages at 1% for homeowners and 0.58% for BTL.

Despite the fall in arrears, possessions of homeowner properties rose 10% to 1,340 in Q2, but repossessions of BTL properties declined 2% to 790.

UK Finance director of mortgage Charles Roe says: “Arrears are continuing to fall across both homeowner and buy-to-let mortgages, reflecting resilience in the market. The proportion of mortgages in arrears also remains below long-term averages, even amid the current economic uncertainty.

“Lenders remain committed to helping customers manage their payments, and we urge anyone concerned to contact their lender early. Support is always available and exploring available options with your lender will not affect your credit score.”

Phoebus Software head of sales and marketing Richard Pike says: “The latest UK Finance figures present a mixed picture, with a welcome decline in mortgage arrears offset by a rise in possessions. This suggests that while fewer borrowers are falling behind on repayments, lenders are taking possession more frequently which would indicate a more tight grip on risk when it comes to potential recoveries.

“With the outlook for household finances remaining fragile, and the spectre of higher taxes looming, now is the moment for lenders to lean into intelligent, scalable arrears solutions.”

There were 90,140 mortgage arrears recorded in Q1 of this year.