UK Housing and Mortgage Market Outlook: Growth Expected Through 2026 and 2027
UK Housing and Mortgage Market Outlook
The UK housing and mortgage markets are widely expected to experience renewed growth through 2026 and 2027, following a prolonged period of higher interest rates, affordability pressures and reduced transaction levels. Market forecasts suggest that improving economic conditions, easing borrowing costs and greater regulatory stability will help support a sustained recovery across both owner-occupied and buy-to-let sectors.
After several years of adjustment, the outlook for the housing market appears more balanced, with gradual price growth, rising transaction volumes and improving borrower confidence forming the foundation for longer-term stability.
Mortgage Lending Volumes Poised for Recovery
Gross mortgage lending is forecast to rise steadily over the next two years, reflecting increased activity from home movers, first-time buyers and remortgaging households. Lending volumes are expected to grow from an estimated £288 billion in 2025 to around £320 billion in 2026, before rising further to approximately £350 billion in 2027.
This recovery is being driven by a combination of falling interest rates, improved affordability assessments and greater certainty around future borrowing costs. As lenders compete more actively for business, borrowers are likely to benefit from improved product choice and pricing.
House purchase lending is expected to be the primary driver of growth. Forecasts suggest lending for home purchases could reach £205 billion in 2026 and increase further to £225 billion in 2027, as more buyers return to the market and transaction levels improve.
Remortgaging Activity Set to Increase
Remortgaging is also expected to play a key role in the market’s recovery. As interest rates gradually fall and the impact of previous rate rises works its way through existing mortgage books, more borrowers are likely to find opportunities to refinance onto more competitive deals.
Remortgaging volumes are forecast to rise to approximately £103 billion in 2026 and £110 billion in 2027. This increase reflects both improved affordability and the growing need for borrowers to review their mortgage arrangements as fixed-rate deals come to an end.
For many households, proactive remortgaging advice will be essential to managing monthly costs and long-term financial planning in a changing rate environment.
Buy-to-Let Market Showing Signs of Stabilisation
The buy-to-let sector, which has faced sustained pressure in recent years from tax changes, regulatory reform and higher borrowing costs, is expected to show clearer signs of recovery through 2026 and 2027.
Gross buy-to-let lending is forecast to rise from an estimated £39 billion in 2025 to around £44 billion in 2026, before increasing further to £48 billion in 2027. This growth is being supported by improving rental yields, persistent demand for rental property and increased market churn linked to regulatory changes.
While some smaller or less active landlords are expected to exit the sector, this is likely to be offset by more professional operators expanding their portfolios. Buy-to-let house purchase lending is projected to grow to approximately £12 billion in 2026 and £14 billion in 2027, reflecting this gradual shift in market structure.
House Prices and Transactions Expected to Rise Gradually
House price growth is forecast to remain steady rather than excessive, supporting a more sustainable housing market. Average prices are expected to increase by around 3.0% in 2026 and 3.1% in 2027, reflecting improved demand alongside constrained housing supply.
Transaction volumes are also expected to increase as affordability improves and buyer confidence strengthens. Forecasts suggest total housing transactions could rise to approximately 1.25 million in 2026 and 1.32 million in 2027.
Rising transaction levels are particularly important for the wider property market, providing increased activity for estate agents, conveyancers, surveyors and mortgage professionals, while also supporting related sectors across the economy.
Falling Mortgage Arrears and Improved Affordability
Encouragingly, mortgage arrears are projected to continue declining over the forecast period. This reflects improving affordability, falling interest rates and the completion of much of the upward repricing of existing mortgage books.
The decline in arrears suggests greater financial resilience among borrowers and a more stable lending environment overall. It also highlights the importance of responsible lending standards and early engagement with borrowers facing payment challenges.
As household finances stabilise, lenders and advisers alike are better positioned to focus on long-term borrower outcomes rather than short-term affordability pressures.
Mortgage Advice Remains Central to the Market
Despite improvements in affordability and product availability, the mortgage market remains complex. Regulatory requirements, lender criteria and product structures continue to evolve, making professional advice increasingly important.
It is expected that the vast majority of regulated mortgage lending will continue to be arranged through mortgage advisers over the coming years. Advisers play a crucial role in helping borrowers understand their options, navigate affordability assessments and secure suitable mortgage products that align with their financial circumstances.
This is particularly relevant for buy-to-let investors and borrowers with more complex income profiles, where tailored advice can make a significant difference to outcomes.
A More Positive Outlook for the UK Housing Market
Overall, the outlook for the UK housing and mortgage markets through 2026 and 2027 is cautiously optimistic. While challenges remain, including ongoing regulatory change and broader economic uncertainty, the direction of travel is positive.
Falling interest rates, rising lending volumes and improving transaction levels all point towards a more stable and resilient market environment. For borrowers, landlords and property professionals, the coming years are likely to bring renewed opportunity alongside a greater emphasis on informed decision-making and professional guidance.
As the market continues to evolve, maintaining a focus on affordability, sustainability and good borrower outcomes will remain essential to supporting long-term growth across the UK housing sector.
