Arrears and possessions both continued their downward trajectory across the residential and buy-to-let markets in Q4 2025, according to the latest UK Finance data.
There were 80,490 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in Q4, 4% fewer than in the previous quarter.
Within the total, there were 27,780 homeowner mortgages in the lightest arrears band (representing between 2.5 and 5% of the outstanding balance), also down 4% on the previous quarter.
There were 9,520 buy-to-let mortgages in arrears of 2.5% or more, 9% fewer than in the previous quarter, with 3,480 mortgages in the lightest arrears band, down 7%.
Mortgages in arrears accounted for 0.92% of all homeowner mortgages outstanding, and 0.50% of all buy-to-let mortgages outstanding in the fourth quarter of 2025.
Possessions
1,210 homeowner mortgaged properties were taken into possession in Q4, 13% fewer than in the previous quarter and significantly below the long-term average.
770 buy-to-let mortgaged properties were taken into possession, 14% fewer than in the previous quarter.
Mel Spencer, growth director at Target Group, said: “The data for Q4 2025 paints a cautiously optimistic picture for the mortgage market, with arrears continuing on the downward trajectory they have been on since early 2024. Overall rates are still at historically low levels. Owner occupiers and landlords proved remarkably resilient in Q4, despite lingering economic pressures.
"I am starting to think this trend might continue. Not only is effective lender support paying off, we can see the economy is improving. Nationwide, Halifax and Rightmove all reported a rebound in house prices at the start of the year. And consumer confidence rose for the second consecutive month in January, according to the research company GfK. This is just the latest sign of improved momentum. Added to that, Andrew Bailey has suggested there is scope for some further easing of the Bank Rate soon.”
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 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. 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."
David Miller, divisional director at Spicerhaart Corporate Sales, added: “The positive momentum continues on arrears with yet another drop in both residential and buy-to-let 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. 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 buy-to-let 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 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.”
