UK Finance Mortgage Market Forecast 2026-2027
UK Finance today releases its Mortgage Market Forecast. In 2026 we expect to see:
- Overall gross lending rise by four per cent to £300 billion.
- 10,000 fewer property transactions in 2026 compared to 2025.
- A 10 per cent rise in external remortgaging and two per cent rise in Product Transfers.
- 1.8 million fixed rate mortgages due to come to an end.
- A further five per cent fall in arrears.
| 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 |
Home and buy-to-let purchases
Lending for house purchases grew by 22 per cent this year to £176 billion, with a notable spike in activity in advance of the stamp duty increase in April.
Next year, however, we forecast growth of two per cent to £180 billion 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 per cent in 2025 to £11 billion. Next year we 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.
Refinancing
The second half of this year saw strong growth in mortgage refinancing as more customers reached the end of their fixed rate deals. 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 per cent to reach an estimated £71 billion in 2025, while Internal Product Transfers (where a borrower stays with their existing lender) rose by 18 per cent to £256 billion.
We expect steady growth next year in both types of refinancing, with external remortgaging growing 10 per cent to £77 billion and Product Transfers by two per cent to £261 billion.
Arrears and possessions
Mortgage arrears levels fell this year to 92,100, down from 104,800 the previous year. We expect arrears to continue to decline by five per cent 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. We estimate there were 8,600 possessions in 2025 and we expect a nine per cent increase in 2026 to 9,400. It is important to note that possession is only ever a last resort, and help is available from your lender if you are worried about paying your mortgage. More information about the support available can be found via the UK Finance website.
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.
“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.”
You May Also Enjoy
Interest rates matter, but asking price is still what sells a home
Three-bedroom homes dominate Britain’s quick-sale market
£3bn tenant deposit shake-up on the cards
Brexit housing market winners and losers
The Rental Market is Rebalancing
