The UK Finance Mortgage Market Forecast for 2026 predicts a 1% drop in property transactions, leading to 10,000 fewer transactions than in 2025.
Lending for house purchases grew by 22% in 2025, to a total of £176 billion, according to the annual review by the trade association for the finance and banking sector. Next year, however, growth of just 2% is forecast, which UK Finance attributes to challenging affordability pressures caused by high mortgage payments in relation to borrower income.
In 2025, new buy-to-let lending increased by 11% to £11 billion, which is forecast to remain unchanged. Any growth is expected to be hampered by additional taxes and regulation in the buy-to-let sector.
Overall, the number of property transactions taking place is expected to decline by 10,000 from 1.21 million in 2025 to 1.20 million in 2026 and 2027.
“The mortgage market showed strength in 2025, particularly for house purchases,” said James Tatch, head of analytics at UK Finance.
“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.”
The second half of the 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.
External remortgaging grew by 17%, to reach an estimated £71 billion, while remortgaing with existing lenders increased by 18% to £256 billion. “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,” Tatch said.
He added:
“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.”
Mortgage arrears fell to 92,100, down from 104,800 in 2024, with a predicted decline of 5% in 2026. Mortgage possessions rose by an estimated 8,600 in 2025, with a 9% increase expected in the coming year.
Commenting on the figures, Mary-Lou Press, president of NAEA Propertymark (National Association of Estate Agents), said:
“As 2025 comes to its conclusion, we have seen steady progress across the year in many areas. We have witnessed three base rate cuts, all of which have all helped enhance consumer confidence and influenced more competitive mortgage products from many lenders.
“We have also seen lenders turn their attention to helping first-time buyers with more specialist products, and a similar approach taken regarding later-life lending as well.
“As we head into 2026, it will not be without challenges. However, many economists are hoping for further base rate cuts into the new year.”
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
Source: UK Finance