Mortgage arrears on a 'downward trend': UK Finance

The number of homeowner mortgages in arrears fell by 2% in Q1 2025 compared to the previous quarter, while the number of buy-to-let arrears fell by 6%, according to the latest data from UK Finance.

UK Finance says the overall proportion of mortgages in arrears remains low, at 1.03% of homeowner mortgages (90,140) and 0.61% of buy-to-let mortgages (11,830).

For comparison purposes, the number of homeowner and buy-to-let mortgages in arrears in Q1 2009, the peak in arrears numbers during the global financial crisis, was 209,600.

During Q1, the number of homeowner and buy-to-let mortgages in early arrears fell, which suggests that any rise in total arrears in the next quarter will be limited. 

The number of properties being taken into possession increased during the quarter, although UK Finance says the overall numbers remain "significantly lower than long-term averages".  

A total of 2,030 homeowner and buy-to-let mortgaged properties were repossessed in Q1 2025. For comparison purposes, this is 85% lower than the 13,200 seen in Q1 2009.  

UK Finance says possessions currently taking place predominantly relate to older mortgages; with more than two-thirds of possessions relating to mortgages arranged at least a decade ago. 

Charles Roe, director of mortgages at UK Finance, said: “The number of mortgages in arrears fell slightly compared to the previous quarter and the arrears numbers appear to now be on a downward trend. The recent cuts in interest rates and mortgage rates will also help households with their monthly bills. 

"This is a positive development, but we recognise that some households may still be struggling. Lenders are committed to supporting anyone facing financial difficulties and offer a range of tailored solutions.” 

Melanie Spencer, sales and growth lead for fintech Target group, commented: “Arrears may look good now but employment levels deteriorated in March. Chancellor Rachel Reeves’ £20bn tax raid on employers has squeezed firms’ profits and figures released by the Office for National Statistics have revealed the number of payrolled employees fell by 53,000 over the first three months of the year. Their early estimate of payrolled employees for April showed a decrease by 33,000. The number of job vacancies has also fallen again, with the rate of decline increasing in the last few months. The business case for hiring has been weakened by a perfect storm of last month’s increased employer national insurance contributions and above-inflation increases to the minimum wage, alongside a wave of measures in the Employment Rights Bill which will make hiring staff riskier and costlier. The labour market is clearly cooling.  

“Weakening labour market activity will inevitably feed into an increase in greater arrears in the future. That’s coming at banks and building societies fast – and when it arrives, unprepared lenders will feel like they’ve been hit by an express train. Owner occupiers and landlord borrowers will need the support; lenders will need the right systems in place to manage processes proactively. Early contact and remediation are key to keeping repossession a last resort and achieving better outcomes for borrowers and lenders alike. That requires investment in systems.”

Richard Pike, chief of sales and marketing at Phoebus Software, added: “It’s encouraging to see a fall in mortgage arrears across both homeowner and buy-to-let sectors this quarter, especially against the backdrop of ongoing cost-of-living pressures and a still-elevated interest rate environment. Today’s stronger-than-expected GDP figures, showing 0.7% growth in the first quarter, suggest that the UK economy has more underlying resilience than many anticipated.

"That said, affordability remains stretched for many borrowers, and the path ahead is still uncertain, especially with no immediate prospect of additional rate cuts. For lenders, the focus must remain on early engagement and using data intelligently to identify borrowers who may be starting to struggle. Ensuring support is both timely and targeted will be critical in maintaining this positive direction.”