What the 2026 Mortgage Market Forecast means for homebuyers, homeowners and landlords

UK Finance has published its latest Mortgage Market Forecast, setting out expectations for the UK mortgage and housing markets over the next two years. It points to modest growth in lending during 2026, alongside ongoing affordability pressures and a continued focus on refinancing activity.

As a residential property team, we regularly advise clients across the homeownership and buy-to-let markets. Here are the key takeaways from the forecast and what they mean in practical terms.

Mortgage lending: modest growth expected

UK Finance forecasts that overall gross mortgage lending will rise by 4% in 2026, reaching £300bn. This reflects a market that remains active but constrained by higher borrowing costs.

Lending for house purchases increased by 22% in 2025 to £176bn, driven partly by buyers completing transactions ahead of the April stamp duty increase. For 2026, UK Finance forecasts a slower growth of 2%, taking purchase lending to £180bn, as mortgage payments remain high relative to borrower incomes.

Property transactions: slight decline forecast

The total number of UK property transactions is expected to fall marginally from 1.21m in 2025 to around 1.2m in both 2026 and 2027. While this is only a small reduction, it suggests a period of stabilisation rather than expansion in the housing market.

In these conditions, preparation and proactive advice remain key for buyers and sellers seeking to progress transactions smoothly.

Buy-to-let lending: growth expected to level off

New buy-to-let purchases rose by 11% in 2025 to £11bn. However, UK Finance expects new purchase levels to flatten in 2026, with additional taxation and regulatory requirements continuing to affect investor appetite.

Remortgaging and product transfers: a key feature of 2026

Refinancing activity is expected to remain strong. Around 1.8m fixed-rate mortgages are due to end in 2026, compared with 1.6m in 2025.

UK Finance forecasts that external remortgaging will grow by 10% to £77bn in 2026, while internal product transfers are expected to increase by 2% to £261bn. Homeowners nearing the end of a fixed-rate deal should plan ahead and consider both financial and legal aspects of refinancing.

Arrears and possessions: pressures easing overall

Mortgage arrears fell from 104,800 in 2024 to 92,100 in 2025, a drop of 12%. UK Finance expects arrears to decline by a further 5% in 2026, to around 87,500.

Interestingly, the report notes:

“The increase in arrears seen through the worst of the cost-of-living crisis was modest and largely concentrated amongst older mortgages that do not have the same level of resilience.”

This refers to structural differences between legacy pre-2008 mortgage lending and the post-crisis regulatory framework. Following the financial crisis, affordability checks, income verification and interest-rate stress testing became mandatory, strengthening the resilience of post-2008 (and particularly post-MMR) mortgage books.

Mortgage possessions increased in 2025. The report attributes this to post-pandemic court activity returning to typical levels and estimates there were 8,600 possessions in 2025. UK Finance forecasts a 9% rise in 2026 to around 9,400 possessions. While this is an increase, possession volumes remain low compared with pre-pandemic levels.

As James Tatch, Head of Analytics at UK Finance, said in the Mortgage Market Forecast release:

“The mortgage market showed strength in 2025, in particular for house purchases…. Even with the welcome tweaks to lending regulations earlier in 2025, affordability is now at very tight levels and this is likely to limit borrowing options for some prospective customers in 2026.” Read the full Mortgage Market Forecast report here.