---
title: "Press Release: UK Mortgage Arrears Continue to Decline for Second Consecutive Quarter"
description: Press release on the Q3 2025 instalment of the Pepper Advantage Credit Intelligence Series.
---

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# [Press Release: UK Mortgage Arrears Continue to Decline for Second Consecutive Quarter](https://www.pepper-advantage.com/resources/press-release-uk-mortgage-arrears-continue-to-decline-for-second-consecutive-quarter)

 Written by [Admin](https://www.pepper-advantage.com/resources/author/admin) | Oct 21, 2025 7:00:00 AM

UK arrears rate drops by 0.3% but increase in late payments indicate potential trouble ahead

**London, 21 October 2025** – [Pepper Advantage](https://www.pepper-advantage.com/), a global credit management and technology company, today released the latest data on its portfolio of over 100,000 UK residential mortgages. In Q3 2025, the **arrears rate dropped 0.3%, **following a significant **4.4% decline in Q2 2025***. The Q3 data also highlights a rebound in new mortgage originations, which surged by **20.2%** compared to the previous quarter.

**Key Findings**

- **Arrears Rate Declines**: The arrears rate across Pepper Advantage’s UK portfolio decreased by **0.3%** in Q3 2025 compared to Q2 2025. This is only the second drop in arrears since Q3 2022 and follows a **4.4% decline** last quarter.
- **Residential Arrears Improve**: Residential 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) Trends**: The BTL arrears rate increased slightly by **0.1%, **and Direct Debit Rejections (DDRs), a form of missed payment, **fell** **7.9%. **This** **data indicates that the recent instability seen in Pepper Advantage’s BTL portfolio may be past its peak, as many landlords who struggled in a higher rate environment have exited the market.
- **Increased Direct Debit Rejections****: Total UK DDRs 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 CPIH rise **4.1%** in August 2025.
- **New Originations Rebound*****: New originations grew 20.2% compared to Q2 2025, when demand for new originations evaporated following the March expiration of the Stamp Duty holiday.

*“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,”* **said Aaron Milburn, UK Managing Director at Pepper Advantage. ***“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.”***

For additional insights and detailed statistics, please refer to the [complete report](https://www.pepper-advantage.com/resources/uk-mortgage-report-arrears-fall-for-second-consecutive-quarter)  on Pepper Advantage's website.

** Mortgages in arrears are defined as those that are 30+ days delinquent in payment.*

***A direct debit rejection is a form of missed mortgage payment that typically occurs due to insufficient funds when a direct debit is called and is an early indicator of borrower stress.***

****Pepper Advantage manages organic origination for 10 UK originators, 80% of which are capital markets funded.***

[View full post](https://www.pepper-advantage.com/resources/press-release-uk-mortgage-arrears-continue-to-decline-for-second-consecutive-quarter)

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