Growth in UK bank lending is forecast to stall in the coming years, with borrowers reportedly feeling the impact of uncertain economic conditions. Lending growth is expected to slow to 2.9 per cent this year before dropping to a three-year low of 2.2 per cent in 2027, according to figures from EY.
This marks a significant decrease from 3.6 per cent last year. Dan Cooper, head of banking at EY UK & Ireland, stated that the moderation in lending activity is broad-based, as households and businesses become more cautious due to economic uncertainty and higher costs.
Ongoing geopolitical tensions, including disruption to supply chains and volatile oil prices following events in the Strait of Hormuz, are cited as factors driving this shift. Brent crude has traded around the three-digit mark over the last month, reaching highs of $114 this year.
Corporate borrowing is anticipated to be the most affected, with growth tipped to more than halve to 2.1 per cent this year from 5.3 per cent last year. However, renewed business spending on strategic areas like artificial intelligence is expected to lead to a bump in growth in the years ahead, with EY forecasting 2.8 per cent growth in 2027 and 3.9 per cent in 2028.
Mortgage lending growth is projected to rise modestly to 3.3 per cent this year, up from three per cent. However, rising unemployment, slower wage growth, and potential higher interest rates are expected to reduce this growth to 2.2 per cent next year.
Fresh data from the Bank of England revealed that net mortgage approvals for UK house purchases fell to 54,900 in August 2026, below market expectations and the lowest level since December 2023.