UK house sales ‘set to edge down in 2026 amid tight affordability’

UK Finance said it expects around 1.20 million house sales in 2026 and 2027, down from 1.21 million this year.

Lending for house purchases grew by 22 per cent this year to reach £176 billion, with a notable spike before the stamp duty increase in April, UK Finance said.

Next year, it forecasts just 2 per cent growth, to reach £180 billion, as affordability pressures become more challenging due to mortgage payments remaining high compared with borrowers’ incomes.

New buy-to-let (BTL) purchase lending was up by 11 per cent in 2025 to reach £11 billion. Next year, UK Finance forecasts lending to see no change, with growth expected to be affected by taxes and regulation.

The report said there was strong growth in mortgage refinancing in the second half of this year as more customers reached the end of fixed-rate deals.

Read more: Gen Z couples ‘most likely to argue about finances and keep money secrets’

Read more: Bank of England expected to cut interest rates to nearly three-year low

Some 1.6 million fixed-rate mortgages expired in 2025 and around 1.8 million are due to expire in 2026.

The next Bank of England base rate decision is due to be announced on Thursday, giving some people looking to take out a mortgage an early Christmas present if the rate is cut.

UK Finance said mortgage arrears levels fell this year to 92,100 from 104,800 the previous year. It expects arrears to fall by 5 per cent in 2026 to 87,500.

The report also said mortgaged home repossessions rose this year as the industry and courts moved back towards normal levels of activity after the coronavirus pandemic.

An estimated 8,600 repossessions took place in 2025 and UK Finance expects a 9 per cent increase in 2026 to 9,400.

Its report said: “Robust underwriting standards have helped keep arrears levels on mortgages written since 2014 to an absolute minimum.

“The increase in arrears seen though the worst of the cost-of-living crisis was modest and largely concentrated amongst older mortgages that do not have the same level of resilience.”

UK Finance said repossession is a “last resort” and help is available from lenders. Information about support is on the UK Finance website.

James Tatch, head of analytics at UK Finance, said: “The mortgage market showed strength in 2025, particularly for house purchases. But even with welcome tweaks to lending regulations this year, affordability is now very tight and this is likely to limit borrowing options for potential buyers in 2026.

“There was expected growth in remortgage activity this year, and with more households coming off their fixed rates next year, we expect to see further growth in 2026.

“Meanwhile, the number of customers in arrears continued to improve as cost and rate pressures eased, and we are now moving towards the historic lows seen in 2022. Although the number of possessions rose, they remain very low by pre-pandemic comparisons. We do expect a small rise next year, but possessions will remain at low volumes.

“As always, help is available for customers who are worried about paying their mortgage. Speak to your lender as early as possible to explore the tailored support options they have available.”