The total number of mortgages in arrears of at least 2.5% dropped by 3% in Q3 compared to the previous quarter, new UK Finance figures have shown.

This total stood at 93,630 homeowner mortgages at the end of Q3.

UK Finance revealed that within this total, there were 32,860 mortgages in the lightest arrears band – which represents between 2.5% and 5% of the outstanding balance – which was 5% down from Q2.

The banking trade body’s data also showed that there were also 13,000 buy-to-let (BTL) mortgages in arrears of at least 2.5% of the outstanding balance in Q3, 4% fewer than in the previous quarter. Within this total, 5,070 BTL mortgages were in the lightest arrears band, which was 10% fewer than in Q2.

Mortgages in arrears accounted for 1.08% of all homeowner mortgages and 0.67% of all BTL mortgages outstanding in Q3.

Sales and growth lead at Target Group, Melanie Spencer, said: “Following an unchanged picture last quarter, it is great to see the number of arrears cases now reducing for both homeowners and for BTL.

“With the first base rate cut helping to start this positive momentum, the hope is that a similar decision today will sustain this and we see borrowing pressures continuing to ease and cases reducing further.

“There are still real difficulties though and lenders mustn’t forget those borrowers stuck in sizeable arrears.”

UK Finance also published data around possessions, which revealed that 990 homeowner mortgaged properties in the UK were taken into possession in the Q3, a total 1% up on Q2. For BTL mortgaged properties, the figure stood at 710 which was unchanged from Q2.

Chief sales and marketing officer at Phoebus Software, Richard Pike, added: “These arrears and possessions figures are a very encouraging sign either that people are managing their finances better and coming to terms with slowing levels of inflation, or financial institutions are showing more forbearance in line with Consumer Duty and best customer outcomes. I suspect it’s a bit of both.”

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