Key facts
- UK bank lending growth is forecast to reach a three-year low of 2.2% in 2027.
- Mortgage lending growth is expected to rise marginally from 3.0% in 2025 to 3.3% in 2026.
- Consumer credit growth is forecast to fall to 1.9% this year and 0.4% in 2027.
- Corporate borrowing growth is expected to fall from 5.3% in 2025 to 2.1% this year.
- Write-off rates are expected to remain low and stable across all categories.
UK bank lending growth is projected to slow to a three-year low in 2027, with EY's Bank Lending Outlook forecasting a decrease to 2.2% amid economic pressures and increased caution from borrowers. The forecast anticipates a slowdown from 3.6% in 2025 to 2.9% in 2026, before reaching the three-year low in 2027, with a slight recovery to 2.4% in 2028.
Mortgage lending is expected to remain relatively resilient, with growth projected to rise marginally from 3.0% in 2025 to 3.3% in 2026. This resilience is attributed to household incomes rising faster than house prices, supporting affordability, and the ongoing impact of interest rate cuts in 2025. However, EY anticipates that rising unemployment and slower income growth will dampen housing demand in the coming years, leading to slower mortgage lending growth.
Consumer credit growth is forecast to decline significantly, from 3.4% in 2025 to 1.9% this year and 0.4% in 2027, as lenders exercise greater caution due to affordability pressures. Similarly, corporate borrowing growth is expected to more than halve this year, falling from 5.3% in 2025 to 2.1%, as businesses adopt a more cautious investment approach. Despite this near-term slowdown, EY predicts renewed spending on strategic projects will support an uplift in corporate borrowing to 2.8% in 2027 and 3.9% in 2028.
EY highlighted that write-off rates are expected to remain low and stable across all lending categories, indicating slower demand rather than a deterioration in credit quality. UK banks are entering this period from a strong capital position, enabling them to support customers and invest for the future.