IMLA estimates that around 0.85% of mortgage accounts were in arrears at the end of 2025, with this expected to decline to 0.80% by the end of 2026 and 0.74% by the end of 2027

The UK housing market has continued to outperform the wider economy, underpinned by a mortgage market that has absorbed higher interest rates more effectively than many expected, according to analysis from the Intermediary Mortgage Lenders Association (IMLA).

IMLA’s latest report projects that mortgage arrears will continue dropping through 2026 and 2027, even as the final wave of borrowers refinance from ultra-low fixed rates taken out before the recent tightening cycle. IMLA estimates that around 0.85% of mortgage accounts were in arrears at the end of 2025, with this expected to decline to 0.80% by the end of 2026 and 0.74% by the end of 2027.

IMLA says these record lows reflects the resilience created by years of cautious lending practices and a regulatory framework that prioritised affordability and stability following the financial crisis.

However, it believes the continued decline in mortgage arrears, even after the sharpest interest rate shock in decades, raises legitimate questions about whether parts of the mortgage framework have become overly restrictive.

Kate Davies, executive director of IMLA, said: The last two years represented the toughest test the mortgage market has faced since the financial crisis.

Tight post-crisis safeguards and robust affordability assessments meant borrowers were better prepared for higher rates than many anticipated. As a result, arrears are now falling even before rates have fully normalised, she said.

The performance of the market over the past two years shows that the system is more resilient than many may have assumed, she said.

She added: Record-low arrears and strong borrower outcomes suggest that regulation and lending practices have been highly effective in managing risk but also that, in some areas, they may have gone further than was strictly necessary.

The association said recent steps by the FCA to clarify affordability rules, alongside lenders’ own moves to relax policy as interest rates fall, demonstrate that carefully calibrated change is both possible and safe. IMLA believes the latest arrears data indicates there is scope to go further, without undermining consumer protection or financial stability.