A 5 per cent drop in the number of mortgages in arrears of 2.5 per cent or more of the outstanding balance took the figure to 88,200 in Q2 - the lowest level since records began in 1994.
It amounts to 0.8 per cent of the more than 11m mortgages outstanding in the UK.
There were declines across all arrears bands during the second quarter as interest rates remained at record lows.
UK Finance head of mortgages Paul Smee said: "These figures show that the overwhelming majority of borrowers are managing their mortgage payments successfully, and many of those who have experienced some difficulty in the past are able to recover their financial position.
“The recent improvement in the number of mortgages with high levels of arrears is particularly welcome.”
A 5 per cent fall in the number of mortgages with arrears of 10 per cent or more of the outstanding balance ended a run of five successive quarters in which the figure edged upwards.
Meanwhile, the number of properties taken into possession declined from 1,900 to 1,800 - the lowest figure since quarterly data was first published in 2008.
In line with recent trends, the rate of buy-to-let arrears was lower than arrears in the owner-occupied sector, although the buy-to-let possession rate was higher.
This reflects lenders’ tendency to help owner-occupiers overcome any period of financial difficulty and stay in their homes whenever possible.
Mark Pilling, managing director of corporate sales at Colchester-based Spicerhaart, said: “The good news with this morning’s figures is that arrears and possessions are at their lowest level. What the headlines don’t show is the regional differences. Although there were no repossessions recorded in 93 local authorities, the further north we go the more repossessions we see.
“The percentage as a whole is falling, but it is in the areas where house prices, and therefore mortgage lending, are lowest that there are more repossessions, highlighting again the north/south divide when it comes to wages and affordability.
“This is a trend that we have seen for a while, and one that has no easy fix while uncertainty remains and real wages continue to fall as inflation rises. It will be interesting to see what happens in the coming months as the Bank of England struggles to keep a lid on inflation during Brexit negotiations.”