Dan Cooper, EY UK head of banking and capital markets, said: “Looking to the year ahead, the increasingly positive outlook for lending and the prospect of relatively low default rates is welcome news for UK banks and their customers.”.
But with rising house prices and high mortgage rates persisting, mortgage lending growth is expected to be steady after this year, with net growth forecast at 3.2% in 2026 and 3.6% in 2027.
Martina Keane, EY UK & Ireland financial services leader, said: “The UK’s gradual economic recovery is strengthening confidence and translating into more appetite to borrow from UK banks.
The EY ITEM Club forecasts write-off rates on UK mortgages will decrease to 0.001% in 2025, from 0.004% in 2024, as borrowing rates fall, before rising slightly to 0.002% in 2026 and 2027.
“Looking to the year ahead, if interest rates are cut further as expected, borrowing costs should fall, the capacity for household spending will grow, and stronger levels of mortgage borrowing should return after two years of little-to-no growth.
