In the three months to August 2026, gross domestic product (GDP) grew by 0.7%, following growths of 0.5% in the three months to July 2026 and a growth of 0.5% in the three months to June 2026.
Monthly GDP grew by 0.1% in August 2026, defying analysts’ expectations of a slight contraction.
The largest contribution to the growth came from the services sector, which grew by 0.9% in the three months to August 2026. There were falls in the remaining two main sectors, – 1% in construction sector and a 0.2% fall in the production sector in August 2026.
Commenting on the latest figures Financial Markets Online director Samuel Fuller said: “The UK’s solid economic data has showered gifts on its new Chancellor but given a mixed blessing to borrowers and homeowners.
“For Chancellor John Healey, the news is mostly good. Even though construction output continues to slide, growth in the UK’s dominant services sector is solid and broadbased, with 10 out of the 14 services subsectors tracked by the ONS seeing output expand.”
He also pointed to the fact that the IMF now predicts the economy will expand by 1.3% over 2026 as a whole, with the national debt stabilising.
“This is hardly stellar stuff, but the UK’s quiet progress is impressive compared to other major economies and comes despite the energy price shock unleashed by the conflict in the Middle East.
“However the economy’s resilience is less reassuring for anyone thinking of moving home, or the hundreds of thousands due to remortgage in coming months, because it opens the door to higher interest rates.
“The Bank of England’s ratesetting committee is due to meet in three weeks’ time and is now widely expected to increase its base rate to 4%. While that decision isn’t yet set in stone, today’s solid GDP numbers mean the Bank has a free hand to focus solely on getting down inflation.”
Fuller suggested that with the average five-year fixed rate mortgage already charging interest of 6%, the prospect of even higher interest rates could slam the brakes on the already embattled property market and drag down house prices further.
Phoebus Software chief sales and marketing officer Richard Pike commented:“For the majority of people, the current economic situation feels like a contradiction – the UK economy is growing yet households feel poorer, businesses are under pressure and the public finances are stretched.
“In the mortgage market, borrowers are still weighing up affordability and the cost of borrowing, while lenders are dealing with customers in increasingly different financial circumstances.”
He added: “With the Budget just a fortnight away, the Chancellor will need to turn any signs of economic resilience into measures that support sustainable growth. For the housing market, that means addressing the pressures on household finances and creating the conditions for buyers to commit with greater confidence.”
