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UK bank lending growth is forecast to hit a three-year low in 2027 as energy costs and economic pressures squeeze borrowing demand

From the Newshound archive · first published 1 October 2026.

UK bank lending growth is forecast to hit a three-year low in 2027 as energy costs and economic pressures squeeze borrowing demand

EY's UK Bank Lending Outlook forecasts a sharp deceleration in total lending growth, from 3.6% in 2025 to just 2.2% in 2027 — the slowest rate in three years. Corporate lending is projected to more than halve, dropping from 5.3% to 2.1% this year before partially recovering. Consumer credit growth is expected to slow to a near-standstill of 0.4% by 2027, pressured by rising unemployment and fading income growth.

Mortgage lending emerges as the sole bright spot, rising from 3% to 3.3% in 2026, though EY warns that weakening employment and wages will chip away at those gains.

EY's Dan Cooper says default levels should stay contained, pointing to 'slower demand rather than a deterioration in credit quality.'

Geopolitical tensions and high energy costs are identified as the main drivers of the slowdown, with businesses taking a 'more targeted approach to investment.'

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