The number of UK homeowners falling behind on their mortgage payments declined for a 10th consecutive quarter, according to new industry data. UK Finance reported 76,080 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance in the third quarter of 2026, a 10% annual fall and a 2% decrease from the previous quarter. Some 8,170 buy-to-let mortgages were also in arrears, down 22% annually and 3% from the prior quarter. Homeowner property repossessions fell by 17% annually to 1,150, remaining at their lowest level since the fourth quarter of 2024. James Tatch, head of analytics at UK Finance, said the data shows borrowers are continuing to manage their mortgage payments despite rising cost pressures. "With homeowner arrears falling for a 10th consecutive quarter, and possessions well below historic highs, the overall picture is one of a resilient mortgage market, with the vast majority of customers continuing to make their repayments on time," Tatch said. He added that mortgage lenders remain committed to supporting customers who are facing difficulties.
While the annual figures showed improvement, some quarterly comparisons pointed to potential pressures. Total property repossessions increased compared with the previous quarter, from 1,780 to 1,840. Homeowner repossessions were flat quarter-over-quarter, while buy-to-let repossessions saw a 10% quarterly increase to 690, despite a 23% annual fall. UK Finance noted that repossession numbers are still significantly lower than long-term peaks.
The data comes against a backdrop of rising interest rates and inflation. Last week, the Bank of England raised the base rate from 3.75% to 4%, its first increase in more than three years. The central bank also said it expects inflation to continue to accelerate in the coming months before peaking at "around 5%" in the second quarter of 2027. UK Finance said last week that homeowners on tracker mortgage deals faced an increase of around £30 per month to their costs based on typical outstanding balances.
Analysts warned that households face a challenging period ahead. "Unfortunately, the pressure cooker of rising costs shows little sign of cooling," said Susannah Streeter, chief investment strategist at Wealth Club. "With inflation now expected to climb towards 5% next year, borrowing costs are set to ramp higher. That puts homeowners in an increasingly uncomfortable spot." She noted that around 2.3 million fixed-rate mortgage deals are due to expire in 2027, which could test household resilience if mortgage rates remain raised.
According to UK Finance figures, about 87% of outstanding homeowner mortgages are on fixed rates. The industry body said lenders continue to offer support to help customers manage payments as financial circumstances change. Options being explored include increasing the mortgage term, switching to interest-only payments, or taking a payment holiday. Mark Harris, chief executive of mortgage broker SPF Private Clients, said the figures are encouraging overall given higher mortgage rates. "The vast majority of customers are paying their mortgage on time and those who are struggling appear to be getting support from lenders," he said. UK Finance reiterated that anyone worried about their mortgage payments should contact their lender to discuss available options. Tatch acknowledged ongoing challenges, stating, "Despite the positive news on falling arrears, we know customers are currently dealing with a rising cost of living, as well as the impact the war in the Middle East is having on interest rates." The proportion of mortgages in arrears was 0.87% for homeowners and 0.43% for buy-to-let properties in the third quarter.