Lending for residential property purchases grew by 22% this year to £176bn, with a notable spike in activity in advance of the stamp duty increase in April, the latest figures from UK Finance show.
Next year, however, they forecast growth of 2% to £180bn as affordability pressures become more challenging due mortgage payments remaining high compared to borrower income.
New buy-to-let (BTL) lending was up by 11% in 2025 to £11bn. Next year they forecast that to remain unchanged, with growth being impacted by additional taxes and regulation in this area.
Overall, the number of property transactions taking place is expected to slightly decline, from 1.21 million in 2025 to 1.20 million in 2026 and 2027.
| 2026 forecast | Year-on-year change compared to 2025 | |
| Property transactions | 1,202,000 | -1 per cent |
| Gross lending | £300 billion | 4 per cent |
| Lending for house purchase | £180 billion | 2 per cent |
| New buy-to-let purchase lending | £11 billion | 0 per cent |
| Remortgaging | £77 billion | 10 per cent |
| Product Transfers | £261 billion | 2 per cent |
| Arrears | 87,500 | -5 per cent |
| Possessions | 9,400 | 9 per cent |
Refinancing
The second half of this year saw strong growth in mortgage refinancing as more customers reached the end of their fixed rate deals. Some 1.6 million fixed rate mortgages expired in 2025 and around 1.8 million are due to expire in 2026.
This meant external remortgaging grew by 17% to reach an estimated £71bn in 2025, while Internal Product Transfers (where a borrower stays with their existing lender) rose by 18% to £256bn).
UK Finance expect steady growth next year in both types of refinancing, with external remortgaging growing 10% to £77bn and Product Transfers by 2% to £261bn.
Arrears and possessions
Mortgage arrears levels fell this year to 92,100, down from 104,800 the previous year. UK Finance expect arrears to continue to decline by 5% in 2026, to 87,500.
Meanwhile, mortgage possessions rose this year as the industry and courts move back towards normal levels of activity following the pandemic. UK Finance estimate there were 8,600 possessions in 2025 and expect a 9% increase in 2026 to 9,400.
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.
“There was expected growth in remortgage activity this year, and with more households coming off their fixed rates next year, we expect to see further growth in 2026.
“Meanwhile, 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. 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.”
Read the orginal article: https://propertyindustryeye.com/mortgage-market-forecast-2026-whats-in-store/?utm_source=rss&utm_medium=rss&utm_campaign=mortgage-market-forecast-2026-whats-in-store
