Mortgage arrears across both the homeowner and buy-to-let sectors fell in the second quarter of 2025, according to the latest UK Finance data, though repossessions showed a small increase in the owner-occupier market.
A total of 87,380 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance between April and June – 3% fewer than in the previous quarter. Within this figure, 29,840 were in the lightest arrears band of 2.5–5%, also down 3% on the first quarter.
Buy-to-let arrears followed a similar trend, with 11,270 cases in the second quarter – 5% down on the previous three months – of which 4,100 were in the lightest arrears band, a fall of 6%.
Mortgages in arrears accounted for 1.00% of all homeowner loans and 0.58% of buy-to-let loans.
While arrears declined, repossessions ticked up in the residential market. There were 1,340 homeowner mortgaged properties taken into possession – 10% more than in the first quarter – though UK Finance noted that the figure remains significantly below the long-term average. Buy-to-let possessions fell slightly, down 2% to 790 cases.
David Miller, divisional director at Spicerhaart Corporate Sales, said the continued drop in arrears suggested that “the intense financial pressures felt by households and landlords in recent years are beginning to ease” and credited lenders for catching cases early and offering support.
However, he warned that the future path of arrears remained uncertain given a cooling labour market and persistent inflation.
Richard Pike, head of sales and marketing at Phoebus Software, described the figures as a “mixed picture”, with arrears falling but possessions rising. He suggested the increase in possessions pointed to a “more tight grip on risk” from lenders and urged the industry to invest in automation to free resources for cases requiring human intervention.
Mel Spencer, growth director at Target Group, struck a more pessimistic tone, pointing to slowing wage growth, falling employment and reduced vacancies as signs of a weakening jobs market that could push defaults higher.
She warned that the Bank of England’s recent rate cut was “a sticking plaster on a festering wound” and predicted a spike in defaults “heading at banks and building societies like an F1 car on the main straight at full throttle”.
