Buy-to-let mortgage arrears fell 9 percent in the final quarter of 2025, with the number of mortgaged rental properties in arrears dropping to 9,520, according to the latest UK Finance figures published today.
The data shows the market is stabilising after years of pressure from higher interest rates. Within the total, 3,480 BTL mortgages were in the lightest arrears band – seven percent fewer than the previous quarter. Some 770 BTL properties were taken into possession in Q4, a 14 percent drop on the previous three months.
Arrears decline across most regions
Separate data from technology firm Pepper Advantage shows the overall percentage of mortgages in arrears fell by 1.1 percent, with BTL arrears dropping 10.4 percent. The firm says a portfolio migration during the quarter contributed to the fall, although its arrears team also reports broader improvement in the landscape.
Every region in the UK except London and the South West saw arrears rates decline. London recorded a 0.6 percent increase while the South West rose 2.1 percent. For landlords refinancing existing portfolios, these figures suggest lenders are seeing improved borrower resilience compared to the peaks of 2023 and early 2024.
Possessions remain below historic averages
James Tatch, head of analytics at UK Finance, said: “The number of mortgages in arrears continued to fall in Q4. We have also seen a decline in possessions in Q4 due to lenders’ commitment to keep people in their homes over the Christmas period.”
Tatch added that possession numbers remain low by historic standards and are broadly in line with pre-pandemic levels. For context, the number of homeowner and BTL mortgages in arrears in Q2 2009 – the peak during the global financial crisis – was 216,400. More than two-thirds of current possessions relate to mortgages arranged at least a decade ago, suggesting older fixed-rate deals rolling onto higher rates remain the primary source of stress.
Market stabilising but uncertainty remains
Aaron Milburn, UK managing director at Pepper Advantage, said: “Our Q4 results show clear, cautious progress. Arrears have fallen for a third straight quarter and new lending has returned to levels not seen since 2022, the strongest signal yet that conditions in the UK mortgage market are beginning to stabilise.”
However, Milburn cautioned that the outlook remains uncertain. “Changes in inflation, interest rates, or macro-economic shocks could quickly alter current trends,” he said. For landlords approaching remortgage dates, the figures offer some reassurance that lender forbearance remains available for those experiencing temporary difficulties.
The Bank of England held interest rates at 3.75 percent last week, with markets expecting a further cut in the spring. BTL lenders have already begun cutting rates in anticipation, with several reducing product pricing in recent weeks.
Editor’s view
Falling arrears are welcome news for a sector that has absorbed significant rate shocks since 2022. But the regional divergence – with London and the South West bucking the trend – suggests affordability pressures persist in high-value markets. Landlords in these areas should review their stress testing ahead of any remortgage.
Author: Editorial Team – UK landlord & buy-to-let news, policy, and finance
Published: 13 February 2026
Sources: UK Finance, Pepper Advantage
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