Purchases stay flat

Our forecast for house purchase activity this year was relatively flat, driven by tight affordability. Despite the higher mortgage rates seen since start of the war adding to these pressures, our underlying assumption of two per cent growth in 2026 (largely from modestly higher house prices) remains.

Our outlook for Buy-to-let purchase lending also remains relatively flat for 2026, as regulatory pressures (largely from the Renters Rights Act) continue to weigh on landlord appetite, particularly those impacted most by the recent tax changes. 

Remortgaging drives growth

We have continued to see growth in mortgage refinancing so far this year, with repayments of capital and wage growth since borrower's previous loan combatting the impact of higher mortgage rates. We expect steady growth to continue in external remortgaging, rising by ten per cent to £77 billion, and a two per cent rise in Product Transfers to £261 billion.

Overall, total gross lending is projected to rise by a modest four per cent in 2026 to £300 billion, with growth coming primarily from a resilient remortgage market. Year-to-date lending trends suggest these forecasts are broadly on track.

Arrears continue to improve

In December, forecasts saw arrears falling a further five per cent by the end of 2026. Although our expectations for mortgage arrears and possessions currently look to have erred a little on the cautious side, fallout from the war on cost-of-living still has the potential to slow improvements. Year-to-date arrears are already below our forecast and approaching the historic lows seen in 2022.

Finally, we forecast a modest ten per cent increase in possessions in 2026 to 9,400 cases as the industry and court system work to help customers in long-term unrecoverable arrears exit their mortgage with the maximum amount of equity. In the first half of 2026 there have been 3,840 possessions, as set out above. The second half of the year may see volatility in quarterly figures, but the general trend looks to be that increases are slowing, if not over.