The number of UK mortgages in arrears declined in the second quarter of 2026, while possessions fell both quarterly and annually, according to UK Finance.

There were 77,940 homeowner mortgages in arrears of at least 2.5% of the outstanding balance, down 1% from the previous quarter.

Of these, 27,100 were in the lightest arrears band, representing between 2.5% and 5% of the outstanding balance. This was also 1% fewer than in the first quarter.

The number of buy-to-let mortgages in arrears of at least 2.5% fell by 6% to 8,390. Within that total, 2,980 mortgages were in the lightest arrears band, a quarterly decline of 7%.

Mortgages in arrears accounted for 0.89% of all outstanding homeowner mortgages and 0.44% of buy-to-let mortgages.

UK Finance recorded 1,150 homeowner mortgaged properties taken into possession during the quarter, down 8% from the previous three months and 14% from a year earlier.

A further 630 buy-to-let properties were taken into possession, representing declines of 22% on the quarter and 20% year on year. Possession levels remained significantly below their long-term averages.

More than two-thirds of possessions related to mortgages arranged at least a decade ago. UK Finance said lenders sought to keep customers in their homes and used possession only as a last resort after other options had been explored.

James Tatch, head of analytics at UK Finance, said: “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 2003, and remain significantly below the long-term historic average.”

FINANCIAL PRESSURES CONTINUE

Ian Harris, NAEA Propertymark president, said: “Whilst these figures are encouraging, it is important not to lose sight of the financial pressures that continue to affect homeowners and landlords. The reduction in mortgage arrears and repossessions is welcome, but affordability remains a challenge for many across the housing market.

“Early engagement is key to helping those facing financial difficulty, providing an opportunity to explore the support and options available before circumstances become more difficult to resolve. This is particularly important for landlords, where financial pressures can also have wider implications for the availability of homes in the private rented sector.

“With the majority of possessions relating to older mortgages, continued collaboration between lenders, agents and policymakers will be important in supporting those at risk and maintaining confidence and stability across the housing market.”

GOOD WORK

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.

“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.”

OPTIONS

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Despite significant pressure on household finances, the number of mortgages in arrears and homes repossessed fell in the second quarter of the year.

“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.”