According to UK Finance’s Mortgage Market Forecast for 2026-2027, the largest increases will be for remortgaging, which is predicted to go up by 10% annually to £77bn.
This is followed by lending for house purchase, which is expected to increase by 2% year-on-year to £180bn in 2026. This is due to “affordability pressures” becoming “more challenging due [to] mortgage payments remaining high compared to borrower income”.
Product transfers are predicted to increase by 2% to around £261bn.
New buy-to-let (BTL) purchase lending is forecast to stay flat at around £11bn. UK Finance said growth was being impacted by “additional taxes and regulation”.
Looking at property transactions, UK Finance expects a 1% year-on-year drop to 1.2 million, equal to a fall of 10,000 property transactions.
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The report added that around 1.8 million fixed rates are expected to come to an end next year. This compares to around 1.6 million fixed rates that expired in 2025.
Arrears are expected to fall by 5% to 87,500, while possessions are expected to go up by 9% year-on-year to 9,400.
Resi, BTL and refinance lending rise in 2025
Looking at the performance for 2025, lending for house purchases rose by 22% to £176bn, with a “spike” in activity ahead of the stamp duty changes in April.
New BTL lending rose by 11% to £11bn in 2025, while external remortgages grew by 17% to £71bn in 2025 and internal product transfers increased by 18% to £256bn.
Mortgage arrears fell to around 92,100 this year, down from 104,800 in the previous year.
Mortgage possessions grew to 9,600 in 2025 as the industry and courts “move back towards normal levels of activity following the pandemic”.
Mortgage market ‘showed strength in 2025’
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,” he said.
Tatch said that, meanwhile, the number of customers in arrears “continued to improve as cost and rate pressures eased, and we are now moving towards the historic[al] 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,” he noted.
