Mortgage arrears continued to decline during the first quarter of 2026 according to the latest figures from UK Finance, despite ongoing affordability pressures and economic uncertainty.
The trade body said the number of homeowner mortgages in arrears of 2.5% or more of the outstanding balance fell by 2% compared with the previous quarter, reaching 79,110 cases.
Buy-to-let arrears saw a sharper improvement, falling by 6% quarter-on-quarter and by almost a quarter (24%) year-on-year to 8,960 cases.
Overall arrears levels remain historically low, accounting for just 0.91% of homeowner mortgages and 0.47% of buy-to-let mortgages.
BELOW LONG-TERM AVEREAGES
By comparison, during the peak of the global financial crisis in Q2 2009, there were 216,400 homeowner and buy-to-let mortgages in arrears.
While arrears levels improved, possession numbers rose slightly during the quarter, although UK Finance stressed that repossessions remain significantly below long-term averages.
A total of 1,250 homeowner mortgaged properties were taken into possession during Q1 2026, an increase of 3% compared with the previous quarter.
Meanwhile, 810 buy-to-let properties were repossessed, up 5% quarter-on-quarter but unchanged year-on-year.
UK Finance said the majority of possessions continue to relate to much older loans, with more than two-thirds involving mortgages arranged at least ten years ago.
The organisation said repossession remains a last resort after all other support options have been explored.
TAILORED SUPPORT
James Tatch, Head of Analytics at UK Finance, says: “The number of mortgages in arrears continues to fall for both residential and buy-to-let mortgages. While possessions are up very slightly on the previous quarter, they remain low by historic standards.
“Lenders stand ready to support customers who may be worried about meeting their repayments. We would always recommend customers contact their lender as soon as possible to discuss the tailored help available.”
UK Finance said lenders continue to provide a range of tailored support measures for borrowers experiencing financial difficulties and encouraged anyone concerned about repayments to contact their lender early.
The trade body also reiterated that discussing support options with a lender does not affect a borrower’s credit score.
The figures come as borrowers continue to navigate elevated mortgage rates, higher living costs and wider economic uncertainty linked to inflationary pressures and geopolitical instability.
CHANGING LANDSCAPE
David Miller, divisional director at Spicerhaart Corporate Sales, says: “The good work of lenders is on show once again as we see arrears cases fall across all bands in Q1.
“While this is clearly great news, we do have to address the elephant in the room. The landscape is changing rapidly with the ongoing Iran conflict derailing the future path of interest rates and inflation.
“In recent months, we have seen the number of instructions coming to us has increased – particularly for support with assisted voluntary sales. With no signs of an end to this conflict and inflation likely to climb further, lenders must keep that laser focus on forbearance, arrears management and proactive intervention and support.”
LEASHOLD ISSUES
He adds: “We were pleased to see leasehold reform outlined in the King’s Speech this week and it can’t come soon enough – especially as leasehold properties now make up 54% of the properties we manage for clients.
“Leasehold remains a primary driver behind why properties are coming into possession – whether it’s surging service charges, doubling ground rent or increasing difficulties with management companies.
“This is eroding demand and interest, as well as significantly affecting resale values. It’s an area where urgent action from the Government is needed, not further delays caused by yet another Prime Minister merry-go-round.
“Given the current complexities, we are seeing more lenders looking to outsource to trusted partners with real expertise in asset management – helping them to understand the value and any potential risk within their mortgage book, act early and ensure good outcomes for borrowers. On the ground, it is great to see lenders continue to work proactively and in the best interests of their customers.”
INFLATION CONCERN
Mary-Lou Press, NAEA Propertymark President, says: “While it is positive news to hear mortgage arrears sit lower during the first quarter of this year than they did within the quarter directly previous, it is, however, important to acknowledge future affordability constraints, especially concerning current global unrest.
“The current rate of inflation remains a key concern, and the impact this may have on the base rate remains to fully play out yet.
“Should homeowners find themselves in a position where they are worried about repayments, they should proactively speak with their lender at the very first opportunity, as they have a duty to help where possible and will also be keen to do so.”
