UK Finance has released its latest mortgage arrears and possessions data for Q2 2026, which highlighted continuing lender support for customers facing financial difficulty.
There were 77,940 homeowner mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2026, which was 1% fewer than in the previous quarter.
The quarterly improvement was much greater for buy-to-let mortgages where there were 8,390 buy-to-let (BTL) mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2026, which was 6% fewer than in the previous quarter.
Possession numbers decreased in Q2 2026 compared to the previous quarter and are significantly below the long-term average. A total of 1,150 homeowner mortgaged properties were taken into possession in Q2 2026, 8% less than in the previous quarter and 14% less than one year previously.
Again, the improvement was greater for BTL, with 630 BTL mortgaged properties taken into possession, 22% fewer than in the previous quarter and 20% less than one year previously. Overall, possessions remain significantly below long-term averages.
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 2023 and remain significantly below the long-term historic average. If you are concerned about meeting repayments, the first port of call is always to speak to your lender, who stand ready to offer tailored help available.”
Ian Harris, NAEA Propertymark President, commented: “Whilst these figures are encouraging, it is important not to lose sight of the financial pressures that continue to affect homeowners and landlords. The reduction in mortgage arrears and repossessions is welcome, but affordability remains a challenge for many across the housing market.
“Early engagement is key to helping those facing financial difficulty, providing an opportunity to explore the support and options available before circumstances become more difficult to resolve. This is particularly important for landlords, where financial pressures can also have wider implications for the availability of homes in the private rented sector.
“With the majority of possessions relating to older mortgages, continued collaboration between lenders, agents and policymakers will be important in supporting those at risk and maintaining confidence and stability across the housing market.”
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.”
Richard Pike, chief sales and marketing officer at Phoebus software, said: “The fact that mortgage arrears have fallen for an eighth consecutive quarter is an encouraging sign of the resilience of UK borrowers, particularly given the economic uncertainty we have faced over recent months. However, it would be wrong to interpret another fall as evidence that the pressure on household finances has disappeared. Many borrowers are still adjusting to higher mortgage costs than they were used to, while inflation, household bills and a softer labour market continue to create challenges.
Melanie Spencer, growth director at Target Group, said: “While positive, it’s important to view these latest figures against an economic backdrop that remains complex and difficult to predict. The likes of energy price pressures and shipping disruption pose a real threat to inflation, interest rate expectations and to mortgage pricing. 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.”
