Mortgage arrears and repossessions fell annually in the third quarter of this year, according to a banking and finance industry body, despite some rising cost pressures for households.

UK Finance said 76,080 homeowner mortgages were in arrears of 2.5% or more of the outstanding balance in the third quarter of 2026, marking a 10% annual fall and a 2% decrease compared with the previous quarter.

Some 8,170 buy-to-let mortgages were also in arrears, down by 22% annually and a 3% decrease compared with the previous quarter.

Meanwhile homeowner property repossessions fell by 17% annually, reaching 1,150 and remaining at their lowest level since the fourth quarter of 2024.

Homeowner repossessions were flat compared with the previous quarter, with a 0% change recorded.

Some 690 buy-to-let repossessions were recorded, which was a 23% annual fall but a 10% increase compared with the previous quarter.

Mortgages in arrears made up 0.87% of homeowner mortgages and 0.43% of buy-to-let mortgages in the third quarter of 2026, UK Finance said.

It added that, although total repossessions increased compared with the previous quarter, from 1,780 to 1,840, repossession numbers are significantly lower than long-term peaks.

Last week, the Bank of England raised the base rate from 3.75% to 4%, in the first rise in interest rates in more than three years.

Based on typical outstanding mortgage balances, UK Finance said last week that homeowners on tracker deals faced an increase of around £30 per month to their costs.

Around nine in 10 (87%) outstanding homeowner mortgages are fixed rates – and around 2.3 million fixed-rate deals are due to expire in 2027, according to UK Finance figures.

The Bank of England said last week that it expected inflation to continue to accelerate in the coming months before peaking at “around 5%” in the second quarter of 2027.

UK Finance said on Thursday that mortgage lenders continue to offer support to help customers manage their payments, even as financial circumstances change.

It said anyone who is worried about their mortgage payments should reach out to their lender to discuss the options available for their circumstances.

James Tatch, head of analytics at UK Finance, said: “The latest arrears and possessions data shows that 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.

“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.

“Mortgage lenders remain committed to supporting customers who are facing difficulties.

“Anyone worried about keeping up with their repayments should contact their lender as soon as possible to discuss what tailored support is available to them.”

Susannah Streeter, chief investment strategist at Wealth Club, said: “Unfortunately, the pressure cooker of rising costs shows little sign of cooling.

“The UK economy has proved more resilient than expected, with stronger GDP growth suggesting households are still spending and activity holding up.

“The danger is that this strength, alongside the chronic energy squeeze, increases the likelihood that interest rates will head even higher as the bank tries to curb rising prices.

“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.

“Those on tracker mortgages are already feeling the pinch, while around 2.3 million fixed-rate deals are due to expire next year.

“Many households have managed to keep their heads above water so far, but the next wave of refinancing could put their resilience to a much sterner test, particularly if mortgage rates remain elevated for longer.”

Ian Harris, president of NAEA (National Association of Estate Agents) Propertymark, said: “Affordability remains a key challenge for the housing market.

“Mortgage costs and wider household expenditure continue to influence buyer confidence and people’s ability to move home.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Given higher mortgage rates and the potential of further base rate increases, the figures are encouraging overall as the vast majority of customers are paying their mortgage on time and those who are struggling appear to be getting support from lenders.

“Options such as increasing the mortgage term, switching part or all of the mortgage to interest only and perhaps taking a payment holiday are some of the actions being explored by lenders and customers to help ease the situation for those finding themselves in difficulty.”