UK Finance Forecasts: Gross Mortgage Lending and Transaction Volumes in 2026

UK Finance's forecasts for gross mortgage lending in 2026 are a critical component for assessing the broader economic health and the housing market's stability. These projections typically consider a myriad of factors, including the Bank of England's base rate, inflation trends, wage growth, and consumer confidence surveys. For 2026, analysts are keenly watching for indications of whether lending volumes will see a significant rebound after potential adjustments in preceding years. Current estimates suggest that gross mortgage lending could stabilize or see modest growth, with figures potentially reaching upwards of £280 billion to £300 billion. This figure is a significant sum, underpinning a substantial portion of the UK economy. Lenders are likely to remain cautious, with a focus on responsible lending practices. However, the demand for housing, driven by demographic shifts and lifestyle changes, continues to underpin borrowing needs. Areas with strong employment prospects and appealing amenities, such as Manchester or Bristol, often see consistent mortgage activity, driving local transaction volumes. The impact on buy-to-let mortgages also needs consideration; any shifts in lending criteria for investors can directly affect rental yields and the availability of properties for tenants.

Transaction volumes, representing the number of residential property sales, provide a granular view of market activity. Following a period of adjustment, forecasts for 2026 indicate a potential for a more stable, albeit perhaps less frenetic, transaction environment. UK Finance projections might suggest a total of 1.0 million to 1.1 million property transactions for the year. This level, while lower than peak market highs, signifies a healthy, functioning market. Factors influencing this include the availability of properties, buyer affordability, and the willingness of sellers to list their homes. In regions experiencing a significant undersupply, such as certain parts of London or growing commuter towns like Reading, transaction volumes can remain robust even in a fluctuating market, due to persistent demand. For investors, particularly those looking at purpose-built student accommodation (PBSA), understanding local transaction trends can highlight areas with high turnover and strong demand from both students and buy-to-let purchasers. This can correlate with better rental income potential and opportunities for capital appreciation. The interplay between lending volumes and transaction numbers is direct: higher lending often facilitates more purchases, boosting volumes.

The UK Finance forecasts for gross mortgage lending and transaction volumes have profound implications for property investors. A steady or increasing gross lending figure often suggests that buyers, including buy-to-let investors, have access to finance, which can lead to stable or growing property values and healthy rental yields. For investors focused on student accommodation, understanding these broader market trends is crucial. Areas with a chronic bed shortage, particularly in cities with large student populations like Sheffield or Liverpool, often command strong gross yields. The forecast of stable transaction volumes can signal a market where properties are regularly changing hands, indicating liquidity and potential for quicker sales if needed. This is vital for investors seeking to achieve a good ROI within a defined timeframe. Key metrics such as gross yields, expected rental income, and potential capital appreciation are directly influenced by the accessibility of finance and the general demand for property. Investing in purpose-built student accommodation (PBSA) in cities with significant international student populations often yields strong results, especially where there's an identified undersupply of suitable housing. Savvy investors will use these UK Finance forecasts as a foundational layer to identify niche opportunities where demand outstrips supply, such as in HMO licensing areas or burgeoning PBSA markets, thereby enhancing their overall investment returns.

While national forecasts provide a broad overview, the UK property market is inherently regional. Certain areas will undoubtedly outperform others in terms of mortgage lending and transaction volumes in 2026. Major cities like Birmingham, known for its regeneration projects and growing job market, are anticipated to see sustained activity. The average rental yield in these urban centres can vary significantly, often ranging from 5% to 8% for standard residential properties, with PBSA in prime locations potentially exceeding 9%. Areas with excellent transport links, such as those around HS2 routes or new Crossrail stations, are likely to experience increased demand and, consequently, higher transaction volumes. For instance, the West Midlands is a key focus for investment, with forecasts suggesting continued growth in both property values and rental demand, bolstered by substantial infrastructure development. Understanding local amenities, employment hubs, and the specific demographic trends – whether it's an influx of young professionals or international students – is paramount for identifying pockets of opportunity. Savvy investors will look at areas with a clear undersupply of housing, whether for general occupation or purpose-built student accommodation, as these often present the best prospects for consistent rental income and capital appreciation.