Consumer credit growth forecasted to remain flat in 2026

The latest EY ITEM Club data has forecasted that consumer credit lending growth will remain largely flat at 5.8% in 2026 (from 6.1% in 2025), 5.7% in 2027, and 5.3% in 2028.

Even though consumer credit remains expensive, demand is expected to remain steady over the coming years. This is largely due to a combination of weaker real income growth and greater confidence among the UK’s largest spenders resulting in many saving less and relying more on credit to fund purchases. Consumer credit lending growth of 5.7% (net) is forecast in 2027, slowing slightly to 5.3% (net) in 2028.

Write-off rates on loans to UK businesses are expected to remain low and stable. Despite ongoing uncertainty, lower debt-service levels and healthy balance sheets are expected to cushion the impact of slowing economic growth. Rates are forecast to remain at 0.13% in 2026, 2027 and 2028 (in line with 0.13% in 2025).

Mortgage lending expected to grow 2.5% this year, a dip from 3% in 2025, but rebound to 3.3% in 2027, and 3.5% in 2028.

Default rates on UK mortgages are expected to rise a little further but remain low by historical standards. They are forecast to rise to 0.006% in 2026 (from 0.005% in 2025) and 0.007% in 2027 and 2028, as increasing numbers of homeowners on fixed rate mortgages refinance onto deals with higher rates.

Defaults on UK consumer loans are also expected to stay low over the next few years, remaining at 0.8% in 2026 (unchanged from 2025), rising marginally to 0.9% in 2027 and 2028.

Dan Cooper, EY UK & Ireland Head of Banking and Capital Markets, said “While trading conditions are likely to be challenging this year for businesses both big and small, and the banks supporting them, it’s important to recognise that the outlook is still one of growth. The pace of growth is set to pick back up from as early as 2027 as the UK economy strengthens, and all signs point to 2026 being a temporary dip, rather than a long-term slowdown. The UK’s banks are well capitalised and increasingly resilient and, with a brighter outlook ahead, now is not the time for leaders to press pause on their strategic priorities.”