Struggling homeowners face a surge in repossessions, with a 47% increase over the past year due to rising mortgage rates
Mortgage Rates Stabilise, Easing Pressure on Homeowners in the UK
The rise in mortgage rates earlier this year in the UK has not led to a significant increase in home repossessions or mortgage arrears, according to recent data. After a period of rising inflation and base rate increases, mortgage rates began to ease in early 2025, with the Bank of England cutting the base rate from 4.25% to 4.00% in August.
This easing of rates suggests a moderating impact on mortgage pressures rather than an increase in home repossessions or mortgage arrears during 2025 so far. Average fixed mortgage rates have stabilised around 4.5% as of August, offering more predictability for borrowers.
Despite the initial concerns, the recent base rate cuts and stable mortgage rates may help mitigate the risks of mortgage arrears and repossessions. Although precise data on repossession and arrears levels in 2025 are not detailed in the available sources, the trend of rate reductions and inflation control suggests that the rise in mortgage rates earlier in 2025 has not led to a sharp increase in repossessions or mortgage arrears.
However, the data does show a rise in repossessions compared to the previous year. Home repossessions increased by 47% year-on-year in the second quarter of 2025, according to data from UK Finance. Landlord repossessions rose by 11% year-on-year in the same period.
Rachel Springall of Moneyfacts Compare stated that a growing number of borrowers are struggling to keep up with mortgage repayments. She emphasised the importance of refinancing, as the difference between escaping a revert rate is more than 2% compared to 1% in August 2023.
Despite the rise in repossessions, overall numbers remain significantly lower than long-term averages. In the second quarter of 2025, there were 87,380 homeowner mortgages in arrears of 2.5% or more, a decrease of 3% compared to the previous quarter. The number of buy-to-let mortgage arrears also decreased by 5% to 11,270 in the same period.
Landlord repossessions fell 2% compared with the first quarter of 2025, with 790 buy-to-let mortgaged properties repossessed. Claims for possessions increased by 22% to 6,537 in the second quarter of 2025.
Rachel Springall also warned that landlords with a portfolio may have to sell up if they are finding their margins squeezed. She noted that the average two-year fixed rate versus the Moneyfacts average Standard Variable Rate is more than 2%, highlighting the importance of refinancing for landlords as well.
In summary, while there has been a rise in repossessions and mortgage arrears compared to the previous year, the initial rise in mortgage rates earlier in 2025 has not led to a sharp increase as the Bank of England's move to reduce rates in mid-2025 and the stabilisation of mortgage costs likely have prevented significant increases in home repossessions and mortgage arrears in the UK up to August 2025.
Investing in property remains an option for personal-finance strategies, as stable mortgage rates in 2025 have helped minimize the pressure on homeowners, particularly after the Bank of England's base rate cuts. Despite a rise in home repossessions compared to the previous year, the trend of rate reductions and inflation control indicates that investing in mortgages may still offer potential returns. However, it's crucial for property investors, whether homeowners or landlords, to carefully manage their finances, considering factors like refinancing to avoid high revert rates and maintain mortgage payments.
