Mortgage lending is expected to rise in 2026 according to UK Finance, despite ongoing affordability challenges that are likely to keep the number of property transactions broadly flat.
Overall mortgage lending is predicted to increase by 4% in 2026 to reach £300 billion. However, UK Finance expects the number of property transactions to dip slightly, from 1.21m in 2025 to 1.20m in 2026 and 2027. It forecasts that lending for house purchases will grow by just 2% in 2026 to £180 billion. This compares to 22% growth in 2025, although much of this activity took place ahead of the Stamp Duty increase introduced last April.
James Tatch, Head of Analytics at UK Finance, said: “The mortgage market showed strength in 2025, particularly for house purchases. But even with welcome tweaks to lending regulations this year, affordability is now very tight and this is likely to limit borrowing options for potential buyers in 2026.”
Many first-time buyers continue to struggle to purchase a home due to high property prices and elevated mortgage costs, although the Bank of England’s rate cut in December, along with expected further reductions next year, should help ease some of these pressures.
The trade body expects remortgaging to increase by 10% to £77 billion in 2026, with 1.8 million fixed mortgage rate deals due to finish next year. Internal product transfers, which are not subject to the same affordability checks as remortgages to other lenders, are predicted to increase by 2% to £261 billion.
Mortgage possessions are expected to rise in 2026. There were an estimated 8,600 homes repossessed in 2025, with a 9% increase expected in 2026, which would bring the total number of repossessions to 9,400. However, the number of customers in arrears dropped to 92,100 in 2025 and is expected to decline further to 87,500 in 2026.
“The number of customers in arrears continued to improve as cost and rate pressures eased, and we are now moving towards the historic lows seen in 2022,” said Mr Tatch.
“Although the number of possessions rose, they remain very low by pre-pandemic comparisons. We do expect a small rise next year, but possessions will remain at low volumes.
As always, help is available for customers who are worried about paying their mortgage. Speak to your lender as early as possible to explore the tailored support options they have available.”
