UK housing market slowdown 2026

In the second quarter of 2026, UK mortgage activity showed a sharp contraction. Stonebridge’s Mortgage Market Index recorded an 18.5% year‑on‑year drop in total mortgage applications, with first‑time buyer and remortgage requests falling similarly. Borrowers gravitated toward shorter‑term products, while average loan sizes slipped. A contrasting fintech search report hinted at modest month‑on‑month interest, suggesting nascent borrower re‑engagement as lenders broadened product offerings.

A few weeks later, the National Housebuilding Council reported a 4% decline in new‑home registrations for the same quarter, citing higher interest rates, rising costs and affordability pressures as the key drivers. Industry officials linked the slowdown to the same monetary environment that squeezed mortgage demand, while noting recent government housing commitments as a possible counter‑balance.