UK Finance says there were 80,490 homeowner mortgages in arrears of 2.5% of more of the outstanding balance, 4% fewer than Q2.

The overall proportion of mortgages in arrears remains low, at 0.92% of homeowner mortgages and 0.5% of buy-to-let (BTL) mortgages.

Within this total, 27,780 homeowner mortgages were in the lightest arrears band, representing between 2.5% and 5% of the outstanding balance. This was 4% fewer than in the previous quarter.

The number of BTL mortgages in arrears also fell, down 9% compared with the previous quarter, to 9,520.

Within this total, 3,480 BTL mortgages were in the lightest arrears band, 7% fewer than in the previous quarter.

Meanwhile, possession numbers decreased in the last quarter of 2025. UK Finance highlights that possessions “remain low compared to historic norms”.

A total of 1,210 homeowner mortgaged properties were taken into possession in Q4 2025, 13% fewer than in the previous quarter.

Data shows that 770 BTL mortgaged properties were taken into possession, 14% fewer than in the previous quarter.

UK Finance head of analytics James Tatch says: “The number of mortgages in arrears continued to fall in Q4, with BTL arrears down 25% compared to the end of 2024, and homeowner arrears down 13%.”

“We have also seen a decline in possessions in Q4 due to lenders’ commitment to keep people in their homes over the Christmas period. As ever, the number of possessions remain low by historic standards and are broadly in line with pre-pandemic levels.”

Spicerhaart Corporate Sales divisional director David Miller says: “The positive momentum continues on arrears with yet another drop in both residential and BTL cases.”

“Given the expected path of both mortgage rates and the bank rate, it’s hoped that this will continue to be the pattern. It’s certainly helped by the proactive work of lenders to intervene early with support.”

“High LTV product choice at an 18-year high may still alarm some with long memories, but we’re in a strong position with economic conditions improving and lenders more than ready to provide proactive support.”

“It’s positive to see a drop in possessions on the previous quarter in part due to the December moratorium – albeit still up on the previous year.”

Miller adds: “If we are serious about keeping possessions low and as a last resort for lenders, we need to tackle to leasehold reform head on. As we’ve seen, leasehold is a growing driver behind these decisions and an area where reform is desperately needed for all parties.”

“It’s another reason why lenders need trusted partners with real expertise in asset management – particularly in this complex area of the market.”

Also commenting, SPF Private Clients chief executive Mark Harris adds: “Despite significant pressure on household finances, the number of mortgages in arrears and homes repossessed fell in the fourth quarter of last year.”

“Six base-rate reductions in the past 18 months have undoubtedly eased affordability. With two or three more potential cuts forecast in base rate this year, this should further alleviate the pressure on borrowers.”

“The figures also suggest that lenders are showing forbearance and working with borrowers to try and find a solution when the latter find themselves in difficulty.”