There were 77,940 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in Q2, 1% fewer than in the previous quarter, the latest UK Finance data shows.
Within the total, there were 27,100 homeowner mortgages in the lightest arrears band (representing between 2.5 and 5% of the outstanding balance), also 1% fewer than Q1.
Buy-to-let mortgage arrears fell by 6% in Q2, with arrears in the lightest band decreasing by 7%.
Mortgages in arrears accounted for 0.89% of all homeowner mortgages outstanding, and 0.44% of all buy-to-let mortgages outstanding in the second quarter of 2026.
Possessions
1,150 homeowner mortgaged properties were taken into possession over the quarter, 8% fewer than in Q1. This remains significantly below the long-term average, the data shows.
630 buy-to-let mortgaged properties were taken into possession in the second quarter of 2026, 22% fewer than in the previous quarter.
Mark Harris, chief executive of mortgage broker SPF Private Clients, commented: “Despite significant pressure on household finances, the number of mortgages in arrears and homes repossessed fell in the second quarter of the year.
“Despite rising mortgage rates on the back of the Middle East conflict, the downwards trend in arrears and possessions continues. While further rate reductions had been forecast at the start of the year, the Bank of England’s decision to hold base rate at 3.75% for five consecutive meetings has contributed to stability and a steadiness which is assisting borrowers with affordability.
“The figures also indicate that lenders continue to show forbearance and are 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. There may be options open to the borrower, whether it is just a blip or a longer-term issue, 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."
Melanie Spencer, growth director at Target Group, said: “A further fall in mortgage arrears suggests that despite the financial pressures households have faced in recent years, mortgage borrowers are managing to stay in the black. Meanwhile, lenders continue to ensure that any mortgage distress remains contained, highlighting their good work on early intervention and forbearance. While positive, it’s important to view these latest figures against an economic backdrop that remains complex and difficult to predict.
“The UK economy has so far managed to fare reasonably well in light of the conflict in the Middle East – as evidenced once again by this morning’s resilient GDP data. The likes of energy price pressures and shipping disruption pose a real threat to inflation, interest rate expectations and to mortgage pricing. Even with the base rate remaining unchanged, we have seen movements in swap rates and lender funding costs influence the rates available to borrowers – a picture that could yet move further and affect those approaching the end of fixed-rate deals.
“As a result, falling arrears shouldn’t mean complacency. There’s no question that borrowers will continue to be tested as they come to refinance and lenders need to be ready to identify and support those customers as soon as their circumstances change. While possessions have declined in this quarter, lenders still need to be alive to this challenge too, managing these cases effectively and sensitively.”
Richard Pike, chief sales and marketing officer at Phoebus software, added: “The fact that mortgage arrears have fallen for an eighth consecutive quarter is an encouraging sign of the resilience of UK borrowers, particularly given the economic uncertainty we have faced over recent months.
“However, it would be wrong to interpret another fall as evidence that the pressure on household finances has disappeared. Many borrowers are still adjusting to higher mortgage costs than they were used to, while inflation, household bills and a softer labour market continue to create challenges.
“The continued improvement does show that borrowers and lenders have so far managed to navigate these pressures effectively. But lenders cannot afford to become complacent. The risk is increasingly concentrated among those households facing a combination of higher borrowing costs and changing personal circumstances.
“That makes early identification and intervention particularly important. The ability to spot emerging signs of financial stress and engage with customers before arrears become a serious problem will be crucial to sustaining the positive trend. Effective servicing systems can give lenders a much clearer picture of customer circumstances, enabling them to intervene earlier and provide the right support.”
