Mortgage and business lending slowdown expected but dip 'temporary'

UK mortgage lending is expected to grow more slowly this year than in 2025 - while lending by banks to businesses is set to nearly halve amid global and economic uncertainty, according to an economic forecasting grop.

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The EY Item Club bank lending forecast said the net increase in the overall value of mortgage lending will slow to 2.5% this year, compared with a 3% rise in 2025, as limited improvements in affordability and borrowing costs quell housing demand.

Dan Cooper, EY UK & Ireland head of banking and capital markets, said: "The outlook for mortgage lending remains one of growth this year at 2.5%, albeit at a slightly slower pace than 2025. With strong pay growth and relatively small rises in property prices over the last couple of years, most of the improvements in housing affordability have now passed.