UK bank lending growth is set to hit a three-year low in 2027 as Middle East tensions push up energy costs

From the Newshound archive · first published 1 October 2026.

EY's UK Bank Lending Outlook predicts that total lending growth will drop sharply, from 3.6% in 2025 to just 2.2% by 2027 — the slowest pace in three years. Disruption to the Strait of Hormuz has driven Brent crude above $114 this year, squeezing both households and businesses. Dan Cooper, EY's head of banking and capital markets for the UK and Ireland, warned that investment, housing activity and consumer borrowing are all expected to "remain subdued in the near term."

Corporate borrowing is hardest hit, with business lending growth tipped to more than halve to 2.1% this year from 5.3% in 2025.

Mortgages are holding up better for now, rising to 3.3% growth in 2026, but rising unemployment and slower wage growth are expected to drag that back down sharply by 2027.

EY says write-off rates are expected to stay low across all categories, pointing to weak demand rather than a collapse in credit quality.