In this paper we present the results of a household level model of mortgage arrears based on twelve waves of the British Household Panel Survey (BHPS). We use the model to bridge the gap in the UK mortgage default literature between models that emphasize an equity explanation of default, and those that assume an ability to pay explanation. Our model is also the first to examine the effectiveness of Mortgage Payment Protection Insurance in a large sample context (research on MPPI has tended to focus on take-up or has used relatively small sample analysis of effectiveness). We also develop the first hedonic panel model of housing equity to be based on the BHPS and we offer suggestions as to how our BHPS equity variable could be used in other analysis. We find that the odds of arrears increase as the probability of unemployment, separation or divorce, and unsecured debt increase. Savings and MPPI, on the other hand, tend to reduce the odds of arrears. We use our model to predict what the pattern of mortgage arrears would have been over the past decade if unemployment and interest rates had remained constant, and we consider whether the significant differences in the incidence of arrears between Scotland and England persist when household level determinants are held constant.