Thinking about buying a home in the UK soon? You might want to take a closer look at the financial climate. The UK housing market, which saw a relatively strong year in 2025, could be facing a slight slowdown in 2026.
A new forecast from UK Finance shows that even though lending remained high this year, tighter affordability and the strain of rising mortgage costs could cool down house sales going forward. Let’s unpack what’s going on and what it might mean for buyers, sellers, and investors.
Sales
UK Finance predicts house sales will slip slightly from 1.21 million in 2025 to around 1.20 million in both 2026 and 2027. While that might not seem like a huge drop, it’s an important sign that affordability is beginning to bite.
The reason? Buyers are facing high mortgage payments that are not in sync with their income growth. This imbalance is creating a bottleneck, slowing down transactions even though demand hasn’t completely disappeared.
So, if you’re a seller, expect a bit more patience to be needed. If you’re a buyer, you’ll want to assess your affordability range more carefully than ever.
Lending
Total lending for home purchases hit £176 billion in 2025, a sharp 22% jump, partly thanks to a rush of buyers trying to beat the stamp duty rise earlier in the year.
But looking ahead, growth is likely to flatten. In 2026, UK Finance only expects lending to grow by 2%, reaching about £180 billion. That’s quite a slowdown, and it reflects the wider affordability issue.
Buyers simply can’t stretch their finances the way they once did, and that’s going to put a natural cap on how far lending can go.
UK Mortgage Lending Forecasts
| Year | Lending Amount (£bn) | % Change YoY |
|---|---|---|
| 2025 | 176 | +22% |
| 2026 | 180 | +2% |
Buy-to-let
Buy-to-let investors saw an 11% increase in purchase lending in 2025, hitting £11 billion. That’s not bad, considering all the tax and regulatory headwinds landlords have faced recently.
But don’t get too excited — UK Finance expects no growth in this area for 2026. The reality is, landlords are under pressure from all sides, from tax changes to tighter regulation, making the market less attractive for new entrants.
If you’re thinking of jumping into the rental market, you’ll need to be strategic — this isn’t a passive income goldmine anymore.
Remortgages
Here’s where things stayed active: remortgaging. With fixed-rate deals from previous years coming to an end, many borrowers rushed to lock in new terms before rates got any higher.
In 2025 alone, 1.6 million fixed-rate mortgages expired. And in 2026, that number jumps again to around 1.8 million. This wave of refinancing is likely to continue as homeowners look to manage rising monthly payments.
So even if house sales are down, the mortgage market will stay busy — just in a different way.
Arrears
One piece of good news? Mortgage arrears are falling. After a tough stretch during the cost-of-living crisis, arrears dropped to 92,100 cases in 2025, and they’re expected to fall another 5% in 2026, reaching 87,500.
Strong underwriting since 2014 has played a big role in keeping arrears under control. Most of the trouble has come from older mortgages taken out before the tighter lending rules came in.
That said, borrowers shouldn’t get too comfortable. If you’re struggling to pay, the best move is to talk to your lender early — there’s more support available than you might think.
Repossessions
On the flip side, repossessions did rise in 2025, with about 8,600 homes repossessed. And in 2026, that’s expected to rise again by 9%, to around 9,400.
Still, compared to pre-pandemic levels, that’s a pretty modest number. Repossession remains a last resort, and lenders are being cautious not to rush into it.
Rates
Now, let’s talk about interest rates. The Bank of England is set to make its next rate announcement just before Christmas. If they cut rates, it could be a small gift for anyone looking to remortgage or buy.
But even with a cut, don’t expect borrowing to suddenly become easy again. Rates are still much higher than they were in the ultra-low era of the 2010s, and affordability will continue to weigh on the market.
Outlook
So what’s the big picture? 2025 was surprisingly strong in many ways, but the signs for 2026 point to a more cautious environment. Tighter affordability, plateauing lending growth, and sluggish house sales all suggest a cooling phase — not a crash, but a slow, careful step back from the hectic market pace of recent years.
If you’re buying, selling, or investing in 2026, you’ll need to be savvy. Know your numbers, stay informed, and don’t assume past trends will continue unchecked.
The good news? The market’s not collapsing — it’s just catching its breath.
FAQs
Will house sales drop in 2026?
Yes, UK Finance expects a small decline in sales in 2026.
Is mortgage lending increasing?
Yes, but only slightly — about 2% growth expected in 2026.
Are mortgage arrears improving?
Yes, arrears are expected to drop by 5% in 2026.
Will repossessions rise next year?
Yes, a 9% increase in repossessions is forecast for 2026.
What’s happening with remortgaging?
Remortgage activity is growing due to fixed-rate expiries.
