Homeowner and buy-to-let (BTL) investor mortgage arrears fell in Q1, with repossessions rising slightly compared to the final three months of last year.
The latest mortgage arrears and possessions figures released by UK Finance for Q1 show continued robustness in households’ budgets.
In the first quarter of 2026, there were 79,110 homeowner mortgages in arrears of 2.5% or more of the outstanding balance. This was a 2% decrease compared with Q4 2025 and 12% lower than a year earlier.
The number of BTL mortgages in arrears also fell, down 6% compared with the previous quarter and down 24% year-on-year to 8,960.
The overall proportion of mortgages in arrears remains low, at 0.91% of homeowner mortgages and 0.47% of BTL mortgages.
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Repossessions tick up
Possession volumes increased compared with the previous quarter but remained flat year-on-year, while overall numbers remain significantly lower than long-term averages.
A total of 1,250 homeowner-mortgaged properties were taken into possession in Q1 2026, 38 (3%) more than in the previous quarter.
Just over 800 BTL mortgaged properties were taken into possession, 5% greater than in the previous quarter and flat year-on-year. Overall, possessions remain significantly below long-term averages.
UK Finance said the possessions currently taking place were predominantly related to older mortgages, with more than two-thirds of possessions relating to mortgages arranged at least a decade ago.
James Tatch, head of analytics at UK Finance, said: “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[al] 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.”
Commenting on the figures and wider economic indicators, Melanie Spencer, growth director of Target Group, said: “There’s a surprising amount of positive news about. The PMI showed business activity rising in April thanks to an upturn in manufacturing production and output from the services sector.
“Retail sales rose in March, even when excluding the increased cost of fuel. Living standards are improving at the fastest pace since 2022, according to the ONS. And the economy unexpectedly grew during the first full month of the Iran war – suggesting the Middle East conflict has not yet affected growth as much as feared. Growth of 0.3% in gross domestic product in March, down from a revised 0.4% rise in February, was significantly better than I expected.
“On the face of it, these figures back up that rosy assessment. But these statistics also highlight that it’s no time for complacency: the number of properties taken into possession has increased with a total of 1,250 homeowner-mortgaged properties being taken into possession in Q1 2026.
“This is the thin end of the wedge. Lenders should aim to get on the front foot to ensure their servicing operations have the right colleagues, processes, and platforms in place to handle the increased demand and deliver the proper customer outcomes to meet their regulatory obligations. A strong customer experience is also critical – proactive communication and early engagement with borrowers can encourage customers to seek support sooner, helping to reduce arrears and improve long-term outcomes for both lenders and borrowers.”