The UK mortgage market demonstrated further resilience in the final three months of 2025, as both arrears and repossessions declined according to the latest industry data from UK Finance. Released recently this month, the figures highlight ongoing stability in homeowner and buy-to-let lending, with arrears levels remaining low by historical standards and repossessions dropping notably quarter-on-quarter.
At the end of December 2025, 80,490 homeowner mortgages were in arrears equivalent to 2.5 per cent or more of the outstanding balance.
This marked a 4 per cent reduction from the previous quarter, keeping the overall arrears rate steady at a modest 0.92 per cent of all homeowner loans.
Within this group, the lightest arrears category—those between 2.5 per cent and 5 per cent of the balance—totaled 27,780 cases, also down 4 per cent on the prior period.
Buy-to-let mortgages showed even stronger improvement.
The number in arrears of 2.5 per cent or more fell 9 per cent to 9,520, representing just 0.5 per cent of the BTL portfolio.
The mildest band in this sector declined 7 per cent to 3,480 accounts.Year-on-year comparisons reveal even more encouraging progress.
Homeowner arrears were 13 per cent lower than at the close of 2024, while BTL arrears dropped a substantial 25 per cent over the same timeframe.
These trends continue a pattern of gradual easing that has seen arrears move well away from the elevated levels experienced in earlier years of higher borrowing costs.
Repossessions followed a similar downward path.
Lenders took possession of 1,210 homeowner properties in Q4, a 13 per cent decrease from the previous quarter.
For buy-to-let, the figure stood at 770, down 14 per cent.
Overall possession activity stayed significantly below long-term averages and aligned closely with pre-pandemic norms.
UK Finance noted that more than two-thirds of these cases involved mortgages originated at least ten years earlier, underscoring that repossessions typically affect longer-standing borrowers who have exhausted other options.
The industry body emphasised that repossession remains an absolute last resort, deployed only after lenders have explored every possible form of tailored support to help customers stay in their homes.
In many instances, the process allows borrowers who have faced prolonged difficulties to exit the mortgage while retaining a portion of their property’s equity.
Seasonal factors also played a role, with lenders making particular efforts over the Christmas period to minimise disruption for households.
James Tatch, Head of Analytics at UK Finance, highlighted the positive momentum: arrears continued to decline through Q4, supported by lenders’ sustained commitment to customer assistance.
He encouraged anyone concerned about payments to contact their lender promptly, stressing that early discussions do not affect credit scores and can unlock flexible solutions.
The data arrives against a backdrop of broader mortgage market recovery, with arrears now far removed from the 2009 global financial crisis peak of 216,400 combined homeowner and BTL cases.
UK Finance continues to promote its Reach Out campaign, reminding borrowers that proactive engagement with lenders is the most effective way to navigate financial pressures.
Overall, the Q4 2025 update signals continued improvement in mortgage performance.
With arrears proportions low and possessions subdued, the figures reflect the effectiveness of industry support measures and point to a housing finance sector that remains robust despite earlier economic headwinds. Borrowers facing challenges are urged to seek help early, reinforcing the message that support is readily available and repossession is never the first step.