Scottish Housing Market Review: Q2 2025

8. Mortgage Arrears and Possessions

8.1. Arrears

As shown in Chart 8.1, following a peak of 39,556 in Q4 2008 during the financial crisis, there was a long-term decline in the number of regulated mortgage accounts entering arrears across the UK, which continued during the Covid period, reaching a trough of 8,579 in Q3 2021.^[5] This was followed by a steady increase over the next three years, with accounts entering arrears reaching 15,706 in Q3 2023. Since then, despite a small uptick in Q4 2025, there has been a general downward trend in the number of accounts entering arrears, with 10,938 accounts entering arrears in Q1 2025.

Source: FCA. Includes both securitised and unsecuritised loans.

As the flow of mortgages into arrears has moderated, so the stock of mortgages in arears has stabilised. Chart 8.2, which plots the share of lenders' outstanding balances that were in arrears by degree of severity, shows that the share of lenders' outstanding regulated mortgage balances that were in arrears of more than 1.5% of the outstanding loan balance was 1.1% in Q1 2025, similar to its level in the previous 5 quarters, but significantly higher than the post-pandemic low of 0.7% in Q3 2022.

Source: FCA. Includes both securitised and unsecuritised loans; share is calculated as balances on cases which are in arrears expressed as a % of total loan balances.

UK Finance data shows that there were 15,930 buy-to-let (BTL) mortgages in arrears of 1.5% or more of the outstanding balance across the UK at the end of Q1 2025, down by 7.0% from the previous quarter. This is the fifth consecutive quarter-on-quarter fall, with the number of BTL mortgages in arrears falling by 19% since its recent peak of 19,570 in Q4 2023. BTL mortgages in arrears as share of total BTL mortgages has fallen from 0.99% to 0.82% over this period.

FCA data for non-regulated lending (which includes BTL lending but also some other types of lending, and is collected on a somewhat different basis^[6]) shows that at the end of Q1 2025 mortgages which were 1.5% or more in arrears represented 1.6% of the total non-regulated residential loans, down slightly from 1.7% the previous quarter. The share has been at similar levels for the last six quarters, reflecting the decrease in the number of non-regulated mortgages entering arrears each quarter, which has halved from its recent peak of 5,861 in Q3 2023 to 2,954 in Q1 2015.

Source: Buy to Let – UK Finance; Non-regulated loans – FCA. FCA data includes both securitised and unsecuritised loans; the share of loans in arrears is the number of loans in arrears as a percentage of all non-regulated loans.

8.2. Possessions

For regulated mortgages, the downward trend in the number of mortgages entering arrears and the stabilisation in the stock of mortgages in arrears described above have not yet translated into falling possessions, with the 1,151 new possessions in Q1 2025 representing a 15% quarterly increase and a 34% annual increase. However, new regulated possessions remain below their pre-covid levels (the quarterly average in 2019 was 1,318). [Source: FCA]

Non-regulated mortgages also experienced a quarterly increase in possessions, with the 1,156 new possessions in Q1 2025 up by 9% on the previous quarter, although this did represent a 7% fall on an annual basis. They remain above their pre-covid levels (a quarterly average of 889 in 2019). [Source: FCA]

With respect to BTL mortgages specifically, UK Finance data show that there were 810 BTL mortgages taken into possession in Q1 2025, a 16% increase from the previous quarter and an annual increase of 29%. New possessions were also 21% above pre-covid levels (the 2019 quarterly average was 668).

Source: FCA