UK bank mortgage lending growth is expected to peak in 2026 before experiencing a significant slowdown beginning in 2027, according to the EY UK Bank Lending Outlook released on October 1, 2026. The forecast indicates that rising unemployment, stagnant income growth, and persistently high interest rates will contribute to this downturn.
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The report predicts an increase in mortgage lending growth from 3.0% in 2025 to 3.3% in 2026, but then a decline to 2.2% in both 2027 and 2028. In contrast, overall bank lending across all categories is also projected to slow, declining to a three-year low of 2.2% in 2027, impacted by geopolitical tensions in the Middle East, increased energy prices, and slowing economic activity.
Despite the anticipated slowdown, the write-off rates on bank mortgage debt are forecasted to rise only slightly, from 0.008% in 2025 to 0.011% in 2027, suggesting that existing loans are not deteriorating quickly. For mortgage brokers, the implications are clear: the window for advising on purchases or refinances may close sooner than expected. The ongoing rise in gilt yields has already begun to affect fixed-rate pricing for borrowers.
A potential escalation of conflict in the Middle East could push the UK economy toward recession, which might lead to bank lending growth narrowing further to as low as -0.4% in 2028. This risk adds complexity to the housing market, affecting purchase decisions for brokers and their clients.
Martina Keane, EY UK & Ireland financial services leader, highlighted the potential challenges, urging a balanced perspective. She noted that while geopolitical uncertainties are impacting the lending forecast, growth is still expected across major lending categories.
Corporate borrowing growth is also projected to decline significantly, from 5.3% in 2025 to 2.1% in 2026, with a slight recovery to 2.8% in 2027, largely driven by increased investments in technology. Conversely, consumer credit is forecast to drop from 3.4% in 2025 to 1.9% in 2026, further slowing to 0.4% in 2027 as unemployment rises and lenders tighten their criteria.
Dan Cooper, EY UK & Ireland head of banking and capital markets, emphasized that write-off rates remain low across categories, indicating slower demand rather than a crisis in credit quality. The EY report suggests that mortgage lending is nearing its peak, and brokers may face a leaner pipeline in 2027 as demand decreases, underscoring the need for strategic guidance for clients in a tightening market.