Mortgage growth will slow next year as a cost of living crunch puts a dampener on housing demand.
Lending is forecast to grow by just 2.8 per cent in 2026, compared with an expected growth of 3.2 per cent this year, according to economic forecasting group EY ITEM Club.
The report warned that ‘affordability challenges and slowing real income growth’ will impact potential buyers, while uncertainty around the Budget could also deter consumers.
Total UK bank lending growth – across mortgages, business borrowing and consumer credit – is expected to fall from 3.8 per cent this year to 3.3 per cent in 2026, it added.
It comes amid rising unemployment – figures last week showed had hit a four-year high of 5 per cent – and stubbornly high inflation, which at 3.8 per cent is the highest in the G7 economies.
EY said mortgage demand would pick back up again in 2027 as further cuts in interest rates are anticipated.
Martina Keane, EY UK & Ireland financial services leader, said: ‘We are facing a challenging market.’
