The UK Finance Mortgage Arrears and Possessions update showed there were 90,140 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in Q1, a 2% decline on the previous quarter.
This represented 1.03% of all homeowner mortgages and was 7% lower than the same period in 2024.
Within this, 30,700 mortgages were in the lightest arrear band – between 2.5% and 5% of the outstanding loan – which was 3% fewer than in Q4 2024 and 14% down on the year before.
The number of homeowners in arrears of 5-7% of the overall loan totalled 15,740 in Q1, 4% lower than Q4 and 14% down annually. As for borrowers in arrears of 7.5-10% of the balance, there were 10,160 in Q1. This was a 4% decrease on the last quarter and 3% down on the previous year.
Some 33,540 accounts were in heavier arrears of more than 10% of the overall loan, flat on the previous quarter and 4% up on the year before.
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BTL arrears decline
A total of 11,830 BTL mortgages were in arrears of 2.5% or more of the outstanding balance in the first three months of this year, 6% fewer than the last quarter and 12% down on the first few months of 2024. This accounted for 0.61% of all outstanding BTL mortgages.
There were 4,370 BTL mortgage accounts in the lightest arrears band in Q1, a 9% dip on the previous quarter and a significant 28% drop on the last year.
Some 2,260 BTL mortgages were in arrears of between 5% and 7.5% of the total balance, down 9% on the quarter before and 33% lower than the previous year.
A total of 1,520 BTL mortgages were in arrears of between 7.5% and 10% of the loan, 15% down on Q4 but 4% lower than the same period in 2023.
There was a rise in the number of mortgages in heavier arrears of more than 10% of the outstanding loan, totalling 3,680. This was 4% up on Q4 and 50% higher than the previous year.
Possessions rise
There was an 18% quarterly rise in the number of homeowner mortgaged properties that were seized in Q1, totalling 1,220. This was also 44% higher than the same period in 2023.
Some 810 BTL mortgaged properties were possessed, 16% higher than the previous quarter and 29% up on the previous year.
Positive picture for arrears, worries over possessions
Industry professionals said it was good to see the level of arrears had declined since the last quarter, but raised concerns over the rise in possessions.
Richard Pike, chief of sales and marketing at Phoebus Software, said it was “encouraging” to see arrears fall, “especially against the backdrop of ongoing cost-of-living pressures and a still-elevated interest rate environment”.
He also said today’s stronger-than-expected GDP figures, showing 0.7% growth in the first quarter, suggested that the UK economy has more underlying resilience than many anticipated.
Pike added: “That said, affordability remains stretched for many borrowers, and the path ahead is still uncertain, especially with no immediate prospect of additional rate cuts. For lenders, the focus must remain on early engagement and using data intelligently to identify borrowers who may be starting to struggle.
“Ensuring support is both timely and targeted will be critical in maintaining this positive direction.”
Toby Leek, NAEA Propertymark’s president, said: “It’s extremely positive to see mortgage arrears drop to their lowest level since 2009. There has been much progress within the sector to help ensure the overall lending criteria is more robust and offers consumers a higher degree of safety regarding their affordability.
“However, it is concerning to see repossessions witness an increase within the first quarter of 2025, as it demonstrates there is still an aftershock regarding the recent surge in the cost-of-living and support available to those who may need genuine help in the short to medium term.”
Melanie Spencer, the sales and growth lead at Target Group, pointed out that employment levels deteriorated recently, which could impact arrears and possessions going forward.
She added: “Chancellor Rachel Reeves’ £20bn tax raid on employers has squeezed firms’ profits, and figures released by the Office for National Statistics have revealed the number of payrolled employees fell by 53,000 over the first three months of the year. Their early estimate of payrolled employees for April showed a decrease of 33,000. The number of job vacancies has also fallen again, with the rate of decline increasing in the last few months. The business case for hiring has been weakened by a perfect storm of last month’s increased employer National Insurance contributions and above-inflation increases to the minimum wage, alongside a wave of measures in the Employment Rights Bill, which will make hiring staff riskier and costlier. The labour market is clearly cooling.
“Weakening labour market activity will inevitably feed into an increase in greater arrears in the future. That’s coming at banks and building societies fast – and when it arrives, unprepared lenders will feel like they’ve been hit by an express train. Owner-occupiers and landlord borrowers will need the support; lenders will need the right systems in place to manage processes proactively. Early contact and remediation are key to keeping repossession a last resort and achieving better outcomes for borrowers and lenders alike. That requires investment in systems.”
