Lending for house purchases grew by 22% in 2025 to £176bn, new figures published by UK Finance have shown, with a notable spike in activity in advance of the stamp duty increase in April.

The banking trade body has also forecast of a further 2% in 2026 to £180bn, due to affordability pressures becoming more challenging as mortgage payments remain high compared to borrower income.

UK Finance, publishing its latest Mortgage Market Forecast, also revealed that new buy-to-let (BTL) lending was up by 11% in 2025 to £11bn. Next year, the group has forecast BTL lending to remain unchanged, with growth being impacted by additional taxes and regulation in this area.

Overall, UK Finance is expecting the number of property transactions taking place to slightly decline, from 1.21 million in 2025 to 1.20 million in 2026 and 2027.

Head of analytics at UK Finance, James Tatch, said the mortgage market has shown “strength” in 2025, particularly for house purchases.

However, Tatch also warned: “Even with welcome tweaks to lending regulations this year, affordability is now very tight and this is likely to limit borrowing options for potential buyers in 2026.

“There was expected growth in remortgage activity this year, and with more households coming off their fixed rates next year, we expect to see further growth in 2026.”

UK Finance said the H2 period in particular has seen growth in mortgage refinancing as more customers reached the end of their fixed rate deals. An estimated 1.6 million fixed rate mortgages expired in 2025 and around 1.8 million are due to expire in 2026.

This meant external remortgaging grew by 17% to reach an estimated £71bn in 2025, while internal product transfers, where a borrower stays with their existing lender, climbed 18% to £256bn.

Elsewhere, the banking body’s figures also revealed that mortgage arrears levels fell this year to 92,100, down from 104,800 in 2024. UK Finance is expecting arrears to continue to decline by 5% in 2026, to total 87,500.

“The number of customers in arrears continued to improve as cost and rate pressures eased, and we are now moving towards the historic lows seen in 2022,” added Tatch.

“Although the number of possessions rose, they remain very low by pre-pandemic comparisons. We do expect a small rise next year, but possessions will remain at low volumes.”

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