Bank lending growth to hit three-year low in 2027, EY says
Mortgage lending is forecast to rise from 3% to 3.3% as lower interest rates support demand, before slowing to 2.2% in 2027.
UK bank lending growth is forecast to slow from 3.6% in 2025 to 2.9% in 2026 and 2.2% in 2027, according to analysis from EY.
Higher energy costs and wider economic pressures are expected to weaken demand for borrowing.
Corporate lending growth is forecast to more than halve from 5.3% in 2025 to 2.1% in 2026, before rising to 2.8% in 2027.
Mortgage lending is the only category expected to grow faster in 2026.
Growth is forecast to rise from 3% to 3.3% as lower interest rates support demand, before slowing to 2.2% in 2027.
Consumer credit growth is expected to fall from 3.4% in 2025 to 1.9% in 2026 and 0.4% in 2027.
Martina Keane, UK and Ireland financial services leader at EY, said: “Ongoing geopolitical tensions continue to create uncertainty for businesses in the UK.
“While the bank lending forecast reflects the impact of global economic challenges, it is important to keep this in perspective, with growth still set to continue across all major categories.
“The UK banking sector remains resilient and well-positioned to navigate this period of slower activity and banking leaders should remain focused on the longer-term picture, while being ready to adapt quickly should conditions change.”
Keane added: “At the same time, prolonged economic uncertainty means changing customer needs – households may look for greater financial flexibility, while businesses often take a more targeted approach to investment.
“As banks support customers through these near-term pressures, those who continue to invest in AI, emerging technology and broader transformation programmes to tailor their services will be best positioned to capitalise on future opportunities as the economy strengthens.”
Alex Fenton, partner at FBX Capital, said: “It is no surprise that UK lending growth is heading for a three-year low.
“For SMEs, continued uncertainty leaves less room to absorb rising costs or take advantage of growth opportunities, making it harder to plan with confidence.
“That loss of confidence has a direct impact on growth. With the Budget approaching, businesses need clarity on what comes next rather than another round of uncertainty.”
Fenton added: “Ministers can talk about backing small businesses, but firms cannot expand while they are being squeezed by higher costs and unclear policy.
“If firms do not have the confidence to borrow and invest, expansion stalls and ultimately fewer jobs are created.
“That is not a sustainable environment for British business.”
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