Pepper Advantage has reported no overall growth in mortgage arrears across its portfolio of over 100,000 UK residential and buy-to-let (BTL) mortgages in Q1 2025, marking the first time arrears growth has stalled since the start of the cost-of-living crisis.
The zero-growth figure was driven primarily by an improvement in the BTL market, where arrears fell by 0.1% after 12 consecutive quarters of growth.
Despite this, BTL arrears remain 23.4% higher than in Q1 2024, reflecting continued pressure on landlords from high interest rates and margin compression.
Residential mortgage arrears continued to rise, increasing by 0.3% in Q1 following a 2.4% rise in Q4 2024. However, the year-on-year increase remains relatively modest at 1.2%.
Fraser Gemmell, CEO of Pepper Advantage, said: “Zero arrears rate growth for the first time since the cost-of-living crisis began is welcome news, especially with the improvement in the BTL market.
“However, if we look closely at the data, there are still areas of concern – particularly several consecutive quarters of arrears rate growth across London and the South East, where housing costs are highest.”
The report also highlighted a 4.7% rise in new originations during Q1, driven by a surge in completions in March ahead of the stamp duty rise.
Regionally, southern areas such as Greater London, the South East and South West saw arrears growth, while Scotland, Wales, the North East, North West and West Midlands recorded falls.
Gemmell added: “Looking ahead, clouds appear to be gathering over the global economy. The risks of economic fallout from the trade war could prompt the Bank of England to follow the ECB and cut rates, potentially providing some relief.
“The prospect of higher inflation fuelled by disrupted supply chains, however, could unleash cost pressures that once again put financial strain on borrowers. We should not underestimate the potential impact of a challenging macroeconomic outlook and must remain prepared for whatever lies ahead.”
