The Council of Mortgage Lenders (CML) says repossessions fell by 26% to just 21,000, with mortgage arrears also falling to an eight-year low.
The improvement was attributed to the rising levels of employment and continuing low interest rates.
But the CML warned that more homeowners would get into financial difficulty once interest rates started to rise.
"No-one should be lulled into a false sense of security that the current low interest rates we are experiencing will last forever," said the CML's director general Paul Smee.
"Rules are in place to ensure lenders assess future affordability, but these are not a substitute for careful borrowing."
"It's essential for borrowers themselves to have one eye on the future."
More tenants kicked out
One group that experienced more repossessions last year was tenants.
Figures from the Ministry of Justice show that 42,000 tenants saw their homes repossessed by their landlords last year.
That was an 11% jump on 2013 and the highest annual figure since modern records started in 2000.
The figures may simply reflect the big rise in the number of landlords and tenants in the past few years.
But Campbell Robb, chief executive of the charity Shelter, said: "These findings paint a grim picture of the devastating impact our shortage of affordable homes is having on thousands of renters every single month.
"With the cost of housing sky-high, we are hearing from increasing numbers of families who are terrified that just one thing, like a sudden illness or job loss, will leave them homeless."
Repossessions and arrears among mortgage borrowers went up in the wake of the 2009 recession. But in fact, they increased by much less than many had expected.
New rules governing the behaviour of lenders have obliged them to be much more accommodating towards those borrowers who fall behind with their mortgage repayments because of financial difficulties.
This means that repossession has, in most cases, become a measure of last resort.
The CML said that of last year's 21,000 repossessions, 16,100 were among owner-occupiers while 4,900 were of buy-to-let landlords.
Only 1.05% of all mortgages were in arrears to the tune of 2.5% or more of the outstanding mortgage amount.
That meant in practice that 116,800 borrowers were classified as in arrears, down from 144,600 at the end of 2013.
"Even among the heaviest arrears band (more than 10%), there was a 14% decline year-on-year to 24,700 cases at the end of 2014," the CML said.
Meanwhile, the Royal Institution of Chartered Surveyors (Rics) has pointed to a continuing slowdown in activity in the UK property market.
It said that in England and Wales, the number of new buyers approaching its estate agency members had fallen for the seventh month in a row.
Annual house price inflation, as judged by its regular survey of its own members, has "all but levelled off", Rics said.
And in the London market, Rics said prices, inquiries from potential new buyers, and sales had all been falling.
Simon Rubinsohn, the chief economist at Rics, pointed to a continued shortfall in house building, despite an upturn in the past year or so.
"Overall, while the Rics lead indicators suggest the level of house building looks set to increase over the course of 2015, the volume of home starts will still fall considerably short of the number of new households being formed, let alone making a dent in the historic shortfall of housing across all tenures," he warned.
[Source: http://www.bbc.co.uk/news/business-31437209 ]
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