Landlord arrears drop but more BTL investors are repossessing rentals

The level of arrears and repossessions in the BTL sector dropped in the second quarter of 2026 but more landlords are taking back their properties, official data shows.

Data from banking trade body UK Finance shows there were 8,390 BTL mortgages in arrears of 2.5% or more of the outstanding balance in the second quarter of 2026 — down 6% on the previous quarter.

Within the total, there were 2,980 BTL mortgages in the lightest arrears band, representing between 2.5 and 5% of the outstanding balance.

This was 7% fewer than in the previous quarter.

Meanwhile, 630 BTL mortgaged properties were taken into possession in the second quarter of 2026.

This figure is down 22% on the previous quarter.

It comes as separate data from the Ministry of Justice shows landlord possession claims increased by 6% annually in the second quarter of 2026 to 23,635.

Experts claim this suggests BTL investors aren’t struggling with repayments but may be looking to refresh or offload their portfolio amid the Renter’s Rights Act reforms.

Stephen Perkins, managing director at Yellow Brick Mortgages said: "The contrast with the rental sector is interesting.

“BTL mortgage arrears and possessions are falling, yet landlord possession claims have increased.

“That suggests the pressures facing landlords and tenants extend beyond landlords simply struggling to pay their own mortgages."

Mark Alexander, founder of Property118.com, added: “These figures do not support a narrative of landlords being forced out by their banks. It suggests more owners are deciding, or finding it necessary, to recover possession even while mortgage distress across the sector is falling.

“The timing also matters. This quarter included the final month before the Renters’ Rights Act took effect and the first two months afterwards, so the sharp rise in accelerated claims warrants close scrutiny.”