Latest data from UK Finance has found that residential and buy-to-let mortgage arrears and possessions fell in Q2 2026.
A total of 1,150 homeowner mortgaged properties were taken into possession, an 8% fall from the previous quarter and a 14% decrease compared with the same period a year earlier.
There were 630 buy-to-let mortgaged properties taken into possession during the quarter, down 22% from Q1 and 20% compared with a year earlier. UK Finance said possessions currently taking place mostly involve older mortgages, with more than two-thirds relating to mortgages arranged at least 10 years ago. The number of mortgaged properties taken into possession also decreased in Q2 and remained significantly below the long-term average.
However, lenders said they will continue to seek ways to help customers remain in their homes, with possession only taking place as a last resort after all other options have been explored.
The data showed that there were 77,940 homeowner mortgages in arrears by 2.5% or more of the outstanding balance in Q2, down 1% from the previous quarter, of these, 27,100 were in the lightest arrears category, representing between 2.5% and 5% of the outstanding balance. This was also 1% lower than in Q1.
The number of buy-to-let mortgages in arrears fell by 6% over the quarter to 8,390. Within this total, 2,980 mortgages were in the lightest arrears band, down 7% from the previous quarter.
Arrears accounted for 0.89% of all outstanding homeowner mortgages and 0.44% of buy-to-let mortgages during the quarter.
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.”
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.
“The UK economy has so far managed to fare reasonably well in light of the conflict in the Middle East – as evidenced once again by this morning’s resilient GDP data. The likes of energy price pressures and shipping disruption pose a real threat to inflation, interest rate expectations and to mortgage pricing. Even with the base rate remaining unchanged, we have seen movements in swap rates and lender funding costs influence the rates available to borrowers – a picture that could yet move further and affect those approaching the end of fixed-rate deals.
“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.”
David Miller, Divisional Director at Spicerhaart Corporate Sales, said “Quarter after quarter, the tremendous, proactive work of lenders continues to shine through. Even where we’ve seen elevated interest rates in recent years, borrowers have shown that they are managing their commitments well. Where this will be tested is those existing borrowers coming to end of more favourable deals and moving onto much higher rates. Lenders need to be vigilant and stand ready to provide support where it is needed – for those get ready to refinance and as the implications of the Middle East conflict potentially start to bite.
“It’s fantastic to see the number of possessions decline in the quarter. Given what our data is telling us, I would confidently predict that the majority of these cases are leasehold properties – in particular, leasehold flats. They make up over half of the properties we current manage as soaring service charges and ground rents leave many borrowers with limited options and continue to force the hand of lenders. Otherwise as the data shows, possession does remain that last resort, as many lenders look to explore assisted voluntary sales to deliver a positive outcome for all sides.”
