EY forecasts UK bank lending to slow to three-year low by 2027

EY's latest UK Bank Lending Outlook indicates that total bank lending to households and businesses will slow markedly, reaching a three-year low of 2.2% in 2027 after a gradual decline from 3.6% in 2025. Mortgage lending is expected to be the most resilient segment, rising slightly to 3.3% in 2026 but then falling to 2.2% in both 2027 and 2028 as rising unemployment and slower income growth curb housing demand. Consumer credit growth is projected to tumble from 3.4% in 2025 to just 0.4% by 2027, reflecting tighter borrower affordability and more selective lending.

Corporate borrowing is also set to slow sharply, with growth falling from 5.3% in 2025 to 2.1% this year, though a modest rebound to 3.9% by 2028 is expected as firms resume strategic investments. Write-off rates for mortgages and other credit categories are forecast to stay low, suggesting that the slowdown stems from weaker demand rather than deteriorating credit quality. EY executives stress that UK banks remain well-capitalised and positioned to support customers while adapting to evolving economic pressures.