Mortgage arrears fell by 0.3% in Q3

Latest data from Pepper Advantage, has found the arrears rate dropped 0.3% in Quarter 3 (Q3) 2025, following a significant 4.4% decline in Q2 2025.

The data highlights a rebound in new mortgage originations, which surged by 20.2% compared to the previous quarter. Mortgages saw a 0.2% drop in the arrears rate, although this is a deceleration from the 4.7% decrease observed in Q2.

Buy-to-let (BTL) arrears rate increased slightly by 0.1%, and direct debit rejections, a form of missed payment, fell 7.9%. Total direct debit rejections grew by 4.2% in Q3, contrasting with a 5.1% decline in Q2. This increase may indicate rising financial strain amid ongoing inflationary pressures, which saw the consumer price index, including owner occupiers’ housing costs, rise 4.1% in August 2025.

The data analysis is based upon the company’s analysis of its portfolio of over 100,000 UK residential mortgages

Pepper Advantage UK Managing Director Aaron Milburn said “While we have witnessed a decrease in the arrears rate for the second quarter, the contextual factors suggest that the situation remains precarious for many borrowers.

“Our data, particularly the rise in direct debit rejections, indicates that the overall improvement in arrears, while encouraging, may not reflect a sustained positive trend. We remain watchful as inflation continues to impact household budgets, particularly with rising food and drink costs, as we head into the holiday season.”