UK Finance has reported a continued fall in mortgage arrears in the third quarter of 2025, with buy-to-let (BTL) arrears dropping sharply by eight per cent. The figures suggest a stabilising credit landscape, even as older loans continue to push possession activity slightly higher.
Buy-to-let mortgage arrears show encouraging momentum
The latest UK Finance dataset shows 10,420 BTL mortgages in arrears, down eight per cent on the previous quarter. The lightest arrears band - covering 2.5–5% of the outstanding balance - also improved, falling nine per cent to 3,750 cases.
For context, arrears across the wider market remain low in historic terms: just 0.54% of all BTL mortgages and 0.97% of homeowner loans are currently in arrears. That’s a fraction of the 209,600 arrears cases recorded in Q1 2009, at the height of the financial crisis - a point often forgotten when commentators warn of “landlord distress”.
Letting agents echo the shift. NAEA Propertymark president Mary-Lou Press said the decline shows “stability is returning to the housing market after a challenging period”, pointing to the effectiveness of lender support schemes and the resilience of households navigating higher costs.
Possessions rise slightly but stay below long-term averages
Possessions did edge higher in Q3, but remain at levels consistent with the five years before the pandemic. 900 BTL properties were taken into possession - up 14% on the previous quarter - alongside 1,390 homeowner properties, a four per cent increase.
Crucially, over two-thirds of repossessions relate to loans arranged more than ten years ago. These tend to involve long-running arrears cases rather than new distress linked to recent interest rate movements. For some borrowers, possession becomes the least damaging financial route, helping preserve remaining equity.
Landlords with more recent borrowing remain largely insulated due to improved affordability tests, rising rental demand, and the continued availability of specialist BTL refinancing - although rates remain notably higher than pre-2022 norms.
As one Midlands mortgage broker commented publicly last month, many landlords “planned ahead for refinancing pain” and stress-tested portfolios early, reducing the shock now showing up in legacy homeowner loans instead.
Lender support remains strong as market steadies
UK Finance’s Director of Mortgages, Charles Roe, emphasised that lenders “remain committed to supporting customers who may be struggling”, encouraging early contact from borrowers concerned about payments.
The message is familiar but important. Mortgage lenders continue to offer tailored support ranging from temporary switches to interest-only, to term extensions and structured repayment plans - tools that have quietly helped many landlords navigate a turbulent two years without forced sales.
For investors, this quarter’s figures reinforce a broader pattern: while costs remain elevated, arrears and forced landlord exits are not accelerating. In many regions - particularly the North West and East Midlands, where rental demand is running more than 12% above five-year averages - landlords continue to report stable occupancy and improved monthly cash flow after 2024’s rent adjustments.
Editor’s view
The Q3 arrears data provides a timely counterweight to pessimistic narratives about landlord “distress”. The BTL sector is holding firm, supported by high tenant demand, lender flexibility, and the gradual easing of financing pressures. The real stress continues to sit with legacy mortgages, not today’s investors.
The next question is whether refinancing conditions in early 2026 - when a cluster of 2021–22 BTL fixes expire - will maintain this trend or introduce fresh challenges. Landlords who prepare early will remain in the strongest position.
Author: Editorial team - UK landlord & buy-to-let news, policy, and finance.
Published: 13 November 2025
Sources: UK Finance Q3 2025 Mortgage Arrears & Possessions Report; NAEA Propertymark; ONS Housing Market Data.
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