Residential and BTL arrears both down quarter-on-quarter as possession numbers drop year-on-year for first time since 2023
The number of homeowner mortgages in arrears fell by 1% in the second quarter of 2026 compared to the previous quarter, according to new data published by UK Finance.
There were 77,940 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in Q2 2026. Of these, 27,100 were in the lightest arrears band — between 2.5 and 5% of the outstanding balance — also 1% fewer than in Q1.
Arrears on homeowner mortgages represented 0.89% of all outstanding residential mortgages in the quarter.
In the buy-to-let sector, 8,390 mortgages were in arrears of 2.5% or more, down 6% quarter-on-quarter. The lightest arrears band accounted for 2,980 BTL mortgages, a 7% reduction on the previous quarter. BTL arrears represented 0.44% of all outstanding buy-to-let mortgages.
The latest UK Finance figures also showed a decline in possession volumes in Q2. A total of 1,150 homeowner mortgaged properties were taken into possession during the quarter, 8% fewer than in Q1 2026 and 14% fewer than in the same period a year earlier.
In the BTL segment, 630 properties were taken into possession, down 22% quarter-on-quarter and 20% year-on-year. UK Finance noted that overall possession numbers remain significantly below long-term historical averages.
"The number of mortgages in arrears are falling for both residential and buy-to-let mortgages - and possessions are also down year-on-year for the first time since late 2023, and remain significantly below the long-term historic average," said James Tatch (pictured right), head of analytics at UK Finance.
More than two-thirds of current possessions relate to mortgages arranged at least a decade ago. The trade body said repossession in such cases can allow borrowers who have been struggling for an extended period to exit their mortgage while retaining equity in their property.
"Despite rising mortgage rates on the back of the Middle East conflict, the downwards trend in arrears and possessions continues," said Mark Harris (pictured right), chief executive of mortgage broker SPF Private Clients.
"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."
According to UK Finance, lenders will continue to provide support to borrowers experiencing financial difficulty. The trade body encouraged anyone concerned about their mortgage repayments to contact their lender as early as possible.
"If you are concerned about meeting repayments, the first port of call is always to speak to your lender, who stand ready to offer tailored help available," Tatch said.
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