Mortgage arrears hit lowest level in two years
February 14, 2026 by Brendan O'Neill
Borrowers
The level of missed mortgage payments fell once again during the final quarter of last year, which took arrears to their lowest level in two years.
There was a 1.1% drop in mortgage arrears during the fourth quarter of 2025, which made it the third successive quarter to bring a fall in arrears. As a result, missed payments are now lower than they have been since the final quarter of 2023. This data was issued by the credit tech and management firm Pepper Advantage and is based on more than 100,000 residential mortgages across the UK.
When it comes to residential mortgages alone, the rate of decline in arrears was 0.9%. This represents the latest incremental step forward for that part of the market. Buy-to-let mortgage arrears came down 10.4% during the quarter.
In terms of the UK regions, the only ones that did not see a drop in the rate of mortgage arrears were the South West and London. The former saw a rise of 2.1%, while in the latter it was 0.6%.
Much of the growth in arrears came from younger homeowners – particularly those aged between 21 and 40. Meanwhile, among borrowers over the age of 40, there was a decline in arrears.
Aaron Milburn is employed by Pepper Advantage as its UK managing director. He told Financial Reporter:
“While our data points to a more resilient mortgage market moving into 2026, we share the caution shown by UK households.”
Other recent data indicates that mortgage advisors with the CeMAP qualification are optimistic about 2026, despite economic uncertainty.
Written by
Brendan O'Neill
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