According to UK Finance’s latest arrears and possessions statistics, there were 80,490 homeowner mortgages in arrears of 2.5% or more and around 9,520 BTL mortgages in arrears in Q4 2025.
On the residential side, within the total, there were 27,780 homeowner mortgages in the lightest arrears band of between 2.5% and 5% of the outstanding balance, which is 4% lower than Q3 2025.
Within the BTL segment, around 3,480 BTL mortgages were in the lightest arrears band, 7% down on the previous quarter.
The report found that the overall proportion of mortgages stood at around 0.92% for homeowner mortgages and 0.5% for BTL mortgages, which UK Finance said is “low”.
To compare, the number of homeowner and BTL mortgages in arrears at their peak in Q2 2009 was 216,400.
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Possessions fall in Q4 2025
Looking at possessions, around 1,210 homeowner-mortgaged properties were taken into possession in Q4 2025, 13% less than the previous quarter.
Approximately 770 BTL mortgaged properties were taken into possession, a 14% fall on the previous quarter.
UK Finance reiterated that these “remain significantly below long-term averages”.
It added that possessions tended to relate to older mortgages, with over two-thirds of possession concerning mortgages arranged at least a decade ago.
“For customers who have been struggling with payments for a long time, repossession enables them to exit their mortgage while retaining as much of their home’s equity as possible.
“However, lenders will always seek to ensure customers remain in their homes, with possession only ever taking place as a last resort once all other options have been explored with the customer,” the report said.
James Tatch, head of analytics at UK Finance, said: “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[al] standards and are broadly in line with pre-pandemic levels.
“Lenders remain committed to supporting customers who may be struggling. If you are worried about your mortgage payments, please contact your lender as soon as possible to discuss the tailored help available.”
Base rate cut momentum should mitigate arrears and possessions
Mark Harris, chief executive of mortgage broker SPF Private Clients, said that in spite of “significant pressure on household finances”, mortgages in arrears and possessions fell in the fourth quarter of last year.
He explained: “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. For a lender to take repossession of a property really is the last resort – they would much prefer an open dialogue way in advance of this needing to happen.”
Harris said there may be other options open to the borrower, whether it is a blip or a longer-term problem, such as a payment holiday, switching to interest-only for a while or extending the mortgage term.
“However, it is important that this conversation is started sooner rather than later and that borrowers don’t ignore the problem as that will only make matters worse,” he said.
Leasehold is growing problem for arrears and possessions
David Miller, divisional director at Spicerhaart Corporate Sales, agreed that the “expected path of both mortgage rates and the bank rate” suggested that the “positive momentum” would continue with arrears and possessions.
“It’s certainly helped by the proactive work of lenders to intervene early with support. High-loan-to-value (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,” he noted.
Miller said it was positive to see a drop in possessions quarter-on-quarter, which was partially attributed to the December moratorium.
“On the ground, we are seeing increasing challenges around leasehold apartments, with the number coming into possession rising over the last 12 months and now accounting for nearly 50% of the properties we are managing.
“Severe service charges and doubling ground rent are the tip of the iceberg of issues for lenders, which lead to repossession and then significantly reduce demand or interest from buyers or BTL investors. That’s on top of increasing difficulty dealing with management companies, causing delays and additional expense.
“If we are serious about keeping possessions low and as a last resort for lenders, we need to tackle… 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,” he said.
