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

EY’s latest UK Bank Lending Outlook indicates that overall bank credit expansion will slow to its weakest pace in three years by 2027, with growth falling to 2.2% after a gradual decline from 3.6% in 2025. Mortgage lending is expected to outperform other credit lines, climbing to 3.3% in 2026 before easing to 2.2% in both 2027 and 2028, supported by recent income gains and pending rate cuts. Consumer credit, however, is set to contract sharply, falling to 0.4% in 2027 as households become more cautious amid rising unemployment and slower wage growth.

Corporate loan growth is also projected to halve this year, reaching 2.1% before a modest rebound to 2.8% in 2027 and 3.9% in 2028, reflecting restrained investment plans. Write-off ratios are forecast to remain low, with mortgage write-offs barely moving above 0.01% and corporate write-offs slipping to 0.14% by 2028, indicating stable credit quality despite the slowdown.