Mortgage arrears have fallen for a tenth consecutive quarter. However, property analysts warn that higher borrowing costs could spell trouble for homeowners and landlords.
New UK Finance figures show homeowner mortgage arrears fell 10% year-on-year to 76,080 in Q3 2026. Buy-to-let arrears dropped 22% to 8,170.
But property repossessions rose compared with the previous quarter.
Lenders took possession of 1,840 properties, up 3% on Q2 but 20% below last year’s level.
Buy-to-let possessions rose 10% to 690 during the quarter. However, they remained 23% lower than a year earlier.
Industry figures welcomed the fall in arrears but warned of further risks from mortgage rates and rising costs.
Are falling arrears hiding financial pressures?
Richard Pike, chief sales and marketing officer at Phoebus Software, warned that the figures may not tell the whole story.
“The continued improvement in arrears helps to reinforce confidence in the UK mortgage sector and support lenders’ appetite to lend,” he said.
“However, there is a risk that improving arrears figures mask some of the underlying pressures facing households.”
Pike warned that higher mortgage costs could take time to affect borrowers, especially those yet to refinance.
He also questioned whether growing unsecured borrowing suggests some households now rely on credit to cover everyday spending.
“The risk is increasingly concentrated among those households facing a combination of higher borrowing costs and changing personal circumstances,” he added.
Estate agents warn over affordability
Ian Harris, president of NAEA Propertymark, welcomed the figures but warned that affordability remains a major barrier to housing market activity.
“Mortgage costs and wider household expenditure continue to influence buyer confidence and people’s ability to move home,” he said.
Harris also stressed the need to maintain confidence among property investors and landlords.
“Ultimately, a healthy housing market depends on people having the confidence and financial ability to buy, sell and invest in property,” he added.
Landlord possessions rise
Mark Harris, chief executive of mortgage broker SPF Private Clients, raised concerns about a rise in landlords with minor mortgage arrears.
He suggested that new laws, including the Renters’ Rights Act, could be making conditions tougher for landlords.
However, total buy-to-let arrears remained well below last year’s levels.
Harris said lenders were exploring ways to help struggling borrowers. Options include longer mortgage terms, interest-only payments and payment holidays.
He urged borrowers to seek help early.
“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.”
Higher mortgage rates pose fresh risk
David Miller, divisional director at Spicerhaart Corporate Sales, warned that borrowers coming off cheaper mortgage deals could face growing pressure.
He said the Middle East conflict had yet to significantly affect borrowers’ ability to meet their payments.
“Where both arrears and repossessions will continue to be tested is through mortgage maturity, as borrowers move off more favourable deals and onto higher rates,” he said.
Miller also highlighted problems involving leasehold properties. These account for more than half the properties his division manages for lenders.
He urged lenders to monitor their customers closely and act before financial problems worsen.
Despite these warnings, UK Finance’s figures show that most borrowers continue to meet their payments.
Just 0.87% of homeowner mortgages and 0.43% of buy-to-let mortgages were in arrears during Q3.
