UK Bank Lending Growth Forecast to Hit Three-Year Low
Ernst & Young forecasts UK bank lending growth will drop to 2.2% by 2027 due to economic pressures and geopolitical tensions.
Growth in UK bank lending to households and businesses is projected to fall to a three-year low of 2.2% in 2027, according to the EY UK Bank Lending Outlook. Ernst & Young expects total lending growth to slow from 3.6% in 2025 to 2.9% in 2026 before hitting the 2027 low.
Economic pressures including rising unemployment, slower income growth, and Middle East geopolitical tensions driving oil price volatility are cited as primary causes for the decline. Corporate borrowing is expected to experience the sharpest immediate drop, falling from 5.3% in 2025 to 2.1% this year. However, strategic investments in AI are forecast to drive a recovery in corporate lending to 3.9% by 2028.
Mortgage lending is projected to be more resilient in the short term, rising to 3.3% in 2026 before declining to 2.2% in 2027. This outlook aligns with Bank of England data showing net mortgage approvals for house purchases fell to 54,900 in August 2026, the lowest level since December 2023.
