The squeeze on first-time buyer affordability reached its most severe level since the global financial crisis in June, according to new data from UK Finance.

Mortgage payments for the typical first-time buyer amounted to 22.6% of gross income, the highest proportion recorded since the financial crisis took hold.

However, gross lending is broadly on track to meet previous forecasts for the year despite the sharp rise in mortgage rates, the industry body confirmed in its half-year household finance review.

UK Finance has maintained its prediction that gross lending will rise by 4% to £300bn this year, despite the sharp rise in mortgage rates since March. Gross lending totalled £145bn in the first six months of 2026.

It says that resilient remortgage activity is offsetting pressure on house purchase affordability.

House purchase lending is expected to increase by 2% to £180bn in 2026, although UK Finance says the rise largely reflects modest house price growth rather than a significant increase in transaction volumes. House purchase lending totalled £82bn in the first half of the year.

Purchase activity remained slightly lower overall in the first seven months of the year than in 2025, when transactions were boosted by buyers rushing to complete ahead of stamp duty changes.

Lending for house purchase in the first half has been relatively resilient at around 1% below the same period last year, UK Finance says.

However, affordability pressures have risen sharply following an increase of around 100 basis points in fixed mortgage pricing from March.

By June, mortgage payments for the typical first-time buyer accounted for 22.6% of gross income, the highest level recorded since the Global Financial Crisis.

UK Finance says rates eased after peaking in early April but began rising again from July.

At the time of its report, the average five-year fixed rate was close to its April peak.

Buy-to-let purchase lending is forecast to remain flat at £11bn this year, with £5bn advanced in the first six months of 2026.

The trade body says the Renters’ Rights Act and recent tax changes have weighed on landlords’ appetite to buy.

Across both residential and buy-to-let, remortgaging is expected to provide the main source of growth in 2026.

External remortgage lending is forecast to increase by 10% to £77bn, with £41bn completed in the first half.

Internal product transfers are expected to rise by 2% to £261bn, following £143bn of lending up to the end of June.

Mortgage arrears have also continued to improve.

UK Finance had forecast a 5% fall to 87,493 mortgages in arrears by the end of 2026, but the number had already dropped to 86,340 by June and is approaching the historic lows recorded in 2022.

There were 3,840 possessions during the first half of the year and UK Finance predicts this will reach 9,415 for the full-year, or a 10% annual increase on 2025.

OSB Group chief commercial officer Jon Hall says: “House purchase lending was broadly flat on the year, running a little under 1% below the same period last year.

“Against most comparators that would be unremarkable, but Q2 last year was the post stamp duty dip, when purchase activity fell by around a tenth.

“The most useful signal is the split.

“Refinancing has held up where purchase activity has not and the same patterns run through the landlord market, where remortgaging has been growing even as buy to let purchases have fallen.

“Across both, borrowers are choosing to stay put and refinance rather than commit to a transaction while pricing is still moving.

“For landlords that looks like consolidation rather than retreat.

“Yields and interest cover have both improved on the year and arrears have fallen, which is not the profile of a sector heading for the exit.

“It is a professional market managing its portfolio and waiting.”