Mortgage arrears and possessions both declined in the final three months of 2025, with cases continuing to run well below long-term averages.

There were 80,490 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the fourth quarter of 2025, 4% fewer than in the previous quarter.

Within that total, 27,780 homeowner mortgages were in the lightest arrears band, representing between 2.5% and 5% of the outstanding balance. This was 4% fewer than in the third quarter.

In the buy-to-let sector, 9,520 mortgages were in arrears of 2.5% or more of the outstanding balance, 9% fewer than in the previous quarter. Of these, 3,480 were in the lightest arrears band, 7% fewer quarter-on-quarter.

Overall, 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.

POSSESSIONS REMAIN BELOW LONG-TERM AVERAGE

There were 1,210 homeowner mortgaged properties taken into possession in the final quarter of 2025, 13% fewer than in the previous quarter and significantly below the long-term average.

In the buy-to-let market, 770 mortgaged properties were taken into possession, 14% fewer than in the third quarter.

David Miller, divisional director at Spicerhaart Corporate Sales, said: “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.”