Gross mortgage lending is forecast to rise 11% year-on-year to £320bn in 2026, and increase a further 9% to £350bn in 2027, a report said.
According to the Intermediary Mortgage Lenders Association’s (IMLA’s) New Normal 2026/27 report, in 2026, house purchase lending is expected to account for around £205bn of lending, with remortgaging coming to £103bn.
In 2026, approximately £225bn is expected to be purchase lending and remortgaging will make up £110bn.
The report noted that a decline in mortgage rates would be the “most significant factor” in driving lending.
On the buy-to-let (BTL) side, the report said this is expected to rise by around 13% year-on-year in 2026 and will come to £48bn in 2027.
House purchase lending in this segment will rise by around 9% and 17% to £12bn and £14bn in 2026 and 2027 respectively.
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The IMLA said the Renters’ Rights Act could “stimulate lending” for house purchases as the “rate of churn” rises due to amateur landlords leaving the market and professional landlords responding to improved rental yields.
Looking at the value of product transfers, the report said this is expected to hit a record £250bn this year.
It noted that product transfers jumped to a record £83bn in Q3 and the year-on-year increase is set to exceed remortgages.
The trade body added that it expected remortgages to grow faster in 2026 at around 11% versus 4% growth in product transfers, due to “improved affordability” improving options for customers.
Mortgage arrears will continue to decrease in 2026 and 2027, coming to 0.8% and 0.74% by the end of 2026 and 2027 respectively. This was attributed to upward repricing of back books on outstanding mortgages reaching completion.
Gross mortgage lending in 2025 expected to come to £288bn
The IMLA found that gross mortgage lending in 2025 itself is expected at around £288bn, a jump of 19% year-on-year.
House purchase lending was 18% higher at £184bn, making up 61% of overall lending, while remortgaging increased by 20% annually to £93bn. Other lending rose 29% over the same period to £11bn.
Looking at BTL lending, gross lending came to £39bn, a rise of 15% on 2024. Purchase lending in this segment increased by 10% to £11bn and remortgage lending came to £26.5bn, up 16% year-on-year.
Arrears for the year were estimated at around 0.85% at the end of Q4 2025, the report said.
Last two years have been ‘toughest test’ for mortgage market
Kate Davies, executive director of the IMLA, said the last two years “represented the toughest test the mortgage market has faced since the financial crisis”.
She explained: “Tight post-crisis safeguards and robust affordability assessments meant borrowers were better prepared for higher rates than many anticipated. As a result, arrears are now falling even before rates have fully normalised.
“The performance of the market over the past two years shows that the system is more resilient than many may have assumed. Record-low arrears and strong borrower outcomes suggest that regulation and lending practices have been highly effective in managing risk but also that, in some areas, they may have gone further than was strictly necessary.”
The trade body said clarification from the Financial Conduct Authority (FCA) on affordability rules, alongside the relaxation of lender policy as interest rates fall, “demonstrate that carefully calibrated change is both possible and safe”.
“The evidence now suggests we can afford to be more ambitious. With arrears low, equity levels high and affordability improving, there is a strong case for continuing to ease access to homeownership in a measured way, so that more first-time buyers can safely take their first step onto the housing ladder,” she said.
