Buy-to-let mortgages in arrears continued to ease in the fourth quarter of 2025, data from UK Finance shows.
There were 9,520 buy-to-let mortgages in arrears of 2.5% or more of the outstanding balance, 9% fewer than in the previous quarter.
Within this, 3,480 BTL mortgages fell into the lightest arrears band, representing 2.5–5% of the balance, down 7% from the previous quarter.
Overall, mortgages in arrears accounted for 0.50% of all buy-to-let mortgages outstanding.
Repossessions also declined, with 770 BTL mortgaged properties taken into possession, 14% fewer than in the prior quarter.
Homeowner arrears and possessions also showed continued improvement. There were 80,490 homeowner mortgages in arrears of 2.5% or more of the outstanding balance, 4% fewer than in the previous quarter. Of these, 27,780 mortgages fell into the lightest arrears band, a 4% decline. Mortgages in arrears accounted for 0.92% of all homeowner mortgages, while 1,210 properties were taken into possession, 13% fewer than in the previous quarter and remaining below the long-term average.
“The positive momentum continues on arrears with yet another drop in both residential and BTL cases," comments David Miller, divisional director at Spicerhaart Corporate Sales, "Given the expected path of both mortgage rates and the bank rate, it’s hoped that this will continue to be the pattern. It’s certainly helped by the proactive work of lenders to intervene early with support. High LTV product choice at an 18-year high may still alarm some with long memories, but we’re in a strong position with economic conditions improving and lenders more than ready to provide proactive support."
He added, “It’s positive to see a drop in possessions on the previous quarter in part due to the December moratorium – albeit still up on the previous year. On the ground, we are seeing increasing challenges around leasehold apartments, with the number coming into possession rising over the last 12 months and now accounting for nearly 50% of the properties we are managing."
"Severe service charges and doubling ground rent are the tip of the iceberg of issues for lenders, which lead to repossession and then significantly reduce demand or interest from buyers or BTL investors. That’s on top of increasing difficulty dealing with management companies, causing delays and additional expense."
“If we are serious about keeping possessions low and, as a last resort, for lenders, we need to tackle the leasehold reform head-on. As we’ve seen, leasehold is a growing driver behind these decisions and an area where reform is desperately needed for all parties. It’s another reason why lenders need trusted partners with real expertise in asset management – particularly in this complex area of the market.”
Emma Cox, MD of Real Estate at Shawbrook, commented, “Whilst property market activity remains subdued, several key indicators have shown a marked improvement, leading the industry to feel more confident about sales activity in 2026. New buyer enquiries in particular have shown improvement from last month’s figures, indicating that the appetite from buyers is present and growing - likely helped by the Government’s push for building new homes.
“Looking ahead, market recovery is expected to be slow but steady, which will be a welcome relief for property investors who may have held back from expanding their portfolio in recent months. While performance varies significantly by region, those with diversified holdings across these shifting markets will be better placed to weather any proverbial storms.”
