Mortgage lending to develop by simply 2% subsequent 12 months, say banks

On Dec 15, 2025

By JOHN-PAUL FORD ROJAS, DEPUTY BUSINESS EDITOR

Updated: 00:05, 15 December 2025

Mortgage lending growth is set to slow sharply next year as buyers struggle to afford repayments, an industry forecast warns.

UK Finance, which represents banks and building societies, predicts loans for house purchases will rise just 2 per cent to £180billion in 2026 – a dramatic slowdown from 22 per cent growth this year.

Property transactions are expected to dip to just over 1.2m, around 10,000 fewer than this year, while repossessions will surge 9 per cent to 9,400. The squeeze comes despite interest rates edging down.

Slowdown: UK Finance predicts loans for house purchases will rise just 2 per cent to £180billion in 2026

The Bank of England is tipped to cut rates from 4 per cent to 3.75 per cent this week, but markets expect only one or two more reductions next year.

James Tatch, head of analytics at UK Finance, said: ‘Affordability is now very tight and this is likely to limit borrowing options for potential buyers in 2026.’

How to find a new mortgage

Borrowers who need a mortgage because their current fixed rate deal is ending, or they are buying a home, should explore their options as soon as possible.

Buy-to-let landlords should also act as soon as they can.

Quick mortgage finder links with This is Money’s partner L&C

> Compare mortgage rates

> Find the right mortgage for you

What if I need to remortgage?

Borrowers should compare rates, speak to a mortgage broker and be prepared to act.

Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it.

Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying expensive arrangement fees.

Keep in mind that by doing this and not clearing the fee on completion, interest will be paid on the fee amount over the entire term of the loan, so this may not be the best option for everyone.

What if I am buying a home?

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.

Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people’s borrowing ability and buying power.

What about buy-to-let landlords?

Buy-to-let landlords with interest-only mortgages will see a greater jump in monthly costs than homeowners on residential mortgages.

This makes remortgaging in plenty of time essential and our partner L&C can help with buy-to-let mortgages too.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to speak to a broker.

This is Money has a long-standing partnership with fee-free broker L&C, to provide you with fee-free expert mortgage advice.

Interested in seeing today’s best mortgage rates? Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

If you’re ready to find your next mortgage, why not use L&C’s online Mortgage Finder. It will search 1,000’s of deals from more than 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with This is Money and L&C

Be aware that rates can change quickly, however, and so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you.

Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage