UK mortgage lending is expected to continue expanding through 2026 and 2027, supported by falling interest rates, improving affordability and a gradual easing of mortgage regulation, according to new forecasts from the Intermediary Mortgage Lenders Association (IMLA).
IMLA’s latest report, The new ‘normal’ – prospects for 2026 and 2027, predicts that gross mortgage lending will rise to £320bn in 2026 and increase by a further 9% to £350bn in 2027.
This compares with an estimated £288bn in 2025, marking a sustained recovery in activity following the volatility of recent years.
House purchase lending is expected to be the main engine of growth, forecast to reach £205bn in 2026 and £225bn in 2027.
IMPROVED AFFORDABILITY
Remortgaging volumes are also set to rise, to £103bn and £110bn respectively, as lower interest rates improve affordability and borrowers revisit fixed-rate deals agreed during the period of higher pricing.
The buy-to-let sector is forecast to extend its recovery over the same period. Gross buy-to-let lending is expected to increase from an estimated £39bn in 2025 to £44bn in 2026 and £48bn in 2027.
IMLA attributes the growth to rising rental yields and increased turnover in the sector, partly driven by the impact of the Renters’ Rights Act.
Buy-to-let house purchase lending is projected to reach £12bn in 2026 and £14bn in 2027, as smaller landlords exit the market and are increasingly replaced by more professional operators.
TRANSACTION INCREASE
The wider housing market is expected to remain among the stronger-performing parts of the UK economy. Average house prices are forecast to rise by 3.0% in 2026 and 3.1% in 2027, alongside an increase in transactions to 1.25 million and 1.32 million respectively.
Mortgage arrears are projected to continue declining as affordability improves and the repricing of existing mortgage books comes to an end.
Intermediaries are expected to retain a dominant role in mortgage distribution despite ongoing regulatory change. IMLA forecasts that around 87% of regulated mortgage lending will continue to be arranged through brokers across both years.
POSITIVE OUTLOOK
Kate Davies (main picture, inset), Executive director of IMLA, says: “The housing and mortgage markets continue to play a vital role in supporting the wider UK economy, and our forecasts show that they are set to remain a source of resilience and growth through 2026 and 2027.
“Falling interest rates, rising transaction levels and a recovering buy-to-let market all point to a more positive outlook for lending activity.”
