The number of homeowner mortgages in arrears fell by 3% in Q2 2025 compared to the previous quarter, while the number of buy-to-let arrears fell by 5%, the latest UK Finance data shows.
In the second quarter of 2025, there were 87,380 homeowner mortgages in arrears of 2.5% or more of the outstanding balance, a 3% decrease compared with Q1.
Within this total 29,840 homeowner mortgages were in the lightest arrears band (between 2.5 and 5% of the outstanding balance), also down 3% from the previous quarter.
The number of buy-to-let mortgages in arrears fell by 5% to 11,270. Of these, 4,100 were in the lightest arrears band, down 6% compared with Q1.
UK Finance says the overall proportion of mortgages in arrears remains low, at 1.00% of homeowner mortgages and 0.58% of buy-to-let mortgages.
Possessions
A total of 1,340 homeowner mortgaged properties were taken into possession in Q2, 10% higher than in the previous quarter.
In contrast, 790 buy-to-let mortgaged properties were repossessed, 2% fewer than in Q1 2025.
While the number of homeowner possessions increased, UK Finance says overall possession numbers remain "significantly lower than long-term averages".
Charles Roe, director of mortgages at UK Finance, commented: “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."
Mary-Lou Press, president of NAEA Propertymark, said: “This should provide some relief to the many people who have been struggling with the cost of living over the last few years and shows that introducing more affordable mortgage products has helped ease the pressures that many people have faced with paying for their mortgage. Should interest rates continue to drop, then this will hopefully result in more affordable mortgage products reaching the marketplace. As overall affordability increases, we should see a positive effect of repossessions decreasing further in the future.”
Phoebus Software’s head of sales and marketing, Richard Pike, added: “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.
“As eligibility criteria for new lending continues to loosen and the risk curve increases in many lenders, this shouldn’t lead to complacency. Automated primary servicing to triage routine cases will allow lender to dedicate resources where human intervention truly matters and get better results. Advanced automation not only reduces operational burden but enhances responsiveness and borrower outcomes.
“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. A more seamless servicing infrastructure will be essential to uphold performance and support vulnerable customers.”
