Mortgage arrears and repossessions fall across UK despite rising household costs

Homeowners and landlords saw mortgage arrears and repossessions decline on an annual basis in the third quarter, figures from a banking industry body show, despite rising cost pressures for households.

UK Finance reported that 76,080 homeowner mortgages had arrears of 2.5 per cent or more of the outstanding balance in the third quarter of 2026. This marked a 10 per cent annual drop and a 2 per cent fall compared with the previous quarter.

A total of 8,170 buy-to-let mortgages were also in arrears, down 22 per cent annually and 3 per cent lower than the preceding quarter.

Meanwhile, homeowner repossessions fell 17 per cent annually to 1,150, remaining at their lowest level since the fourth quarter of 2024. Repossessions for homeowners were flat compared with the previous quarter, showing 0 per cent change.

A total of 690 buy-to-let repossessions were recorded, which represented a 23 per cent annual fall but a 10 per cent increase compared with the previous quarter.

UK Finance noted that mortgages in arrears comprised 0.87 per cent of homeowner mortgages and 0.43 per cent of buy-to-let mortgages overall in the third quarter of 2026.

It added that, although total repossessions increased compared with the previous quarter, from 1,780 to 1,840, repossession numbers are significantly lower than long-term peaks.

Last week, the Bank of England raised the base rate from 3.75 per cent to 4 per cent, in the first rise in interest rates in more than three years.

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Based on typical outstanding mortgage balances, UK Finance said last week that homeowners on tracker deals faced an increase of around £30 per month to their costs.

Around nine in 10 (87 per cent) outstanding homeowner mortgages are fixed rates – and around 2.3 million fixed-rate deals are due to expire in 2027, according to UK Finance figures.

The Bank of England said last week that it expected inflation to continue to accelerate in the coming months before peaking at “around 5 per cent” in the second quarter of 2027.

UK Finance said on Thursday that mortgage lenders continue to offer support to help customers manage their payments, even as financial circumstances change.

It said anyone who is worried about their mortgage payments should reach out to their lender to discuss the options available for their circumstances.

James Tatch, head of analytics at UK Finance, said: “The latest arrears and possessions data shows that borrowers are continuing to manage their mortgage payments despite rising cost pressures.

“With homeowner arrears falling for a 10th consecutive quarter, and possessions well below historic highs, the overall picture is one of a resilient mortgage market, with the vast majority of customers continuing to make their repayments on time.

“Despite the positive news on falling arrears, we know customers are currently dealing with a rising cost of living, as well as the impact the war in the Middle East is having on interest rates.

“Mortgage lenders remain committed to supporting customers who are facing difficulties.

“Anyone worried about keeping up with their repayments should contact their lender as soon as possible to discuss what tailored support is available to them.”