According to the Intermediary Mortgage Lenders Association (Imla), mortgage provision should be relaxed due to declining mortgage arrears.
Overdue mortgage debts will continue to decline in 2026/2027, according to trade body forecasts.
Imla said the UK housing market has outperformed the wider economy, supported by a mortgage market that has absorbed higher interest rates more effectively than many expected.
The trade body’s New Normal 2026/27 report predicts that mortgage delinquencies will continue to fall in 2026 and 2027, even as the latest wave of borrowers refinance with ultra-low fixed interest rates locked in before the recent tightening cycle.
Imla estimates that around 0.85% of mortgage accounts were in arrears at the end of 2025, and this amount is expected to fall to 0.80% at the end of 2026 and 0.74% at the end of 2027.
IMLA says these record lows reflect the resilience created by years of prudent lending practices and a regulatory framework that prioritized affordability and stability following the financial crisis.
IMLA managing director Kate Davies said: “The last two years have presented the toughest test the mortgage market has faced since the financial crisis.
“Strict post-crisis safeguards and robust affordability assessments meant that borrowers were better prepared for higher interest rates than many expected. As a result, delinquencies are now declining, even before interest rates have fully normalized.”
Imla said 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 too restrictive.
“The market’s performance over the past two years shows that the system is more resilient than many may have assumed,” Davies said.
“Record low delinquencies and strong credit performance indicate that regulations and lending practices have been very effective in managing risk, but also that in some areas they may have gone beyond what was strictly necessary.”
The association said recent moves by the Financial Conduct Authority to clarify affordability rules, alongside moves by lenders to relax policies as interest rates fall, show that carefully calibrated change is both possible and safe.
Imla believes that the latest data on payment delays indicates that there is room to go further, without undermining consumer protection or financial stability.
“The evidence now suggests that we can afford to be more ambitious,” Davies added.
“With payment arrears low, equity high and affordability improving, there is a strong argument for continuing to facilitate access to home ownership in a measured way so that more first-time buyers can safely take their first step onto the housing ladder.”