Secured loans are credit products backed with collateral, most commonly a property. Lenders use the asset to reduce risk, which allows higher borrowing limits and longer repayment terms compared with unsecured credit.
Mortgages and second charge loans sit at the centre of the secured loans market and account for most secured lending activity in the UK. Borrowers use these loans for home purchases, refinancing, or large?scale borrowing where affordability tests play a major role.
Lenders assess equity, income, and loan?to?value ratios to determine eligibility. To calculate potential borrowing figures, you can use a trusted homeowner loan calculator offered by KIS Finance.
Photo by Towfiqu barbhuiya on UnsplashSecured Loans Market Performance in 2026
The UK secured loans market is forecast to grow at a net rate of 2.8% in 2026.
This represents a slowdown compared to previous years due to reduced affordability and weaker real income growth. Total bank lending, including consumer and business loans, is expected to reach 3.3% annual growth. These figures reflect a cautious lending environment as borrowers face continued financial pressure.
House price growth is projected at 2%, contributing to stable but limited equity gains for homeowners. Lenders remain selective, favouring lower-risk applicants with stronger credit profiles or substantial equity.
The mortgage segment continues to dominate secured lending, with residential loans accounting for the majority of outstanding balances. In October 2025, the total value of residential mortgage loans stood at £1,703.6 billion, up 2.6% year-on-year.
2026 market forecasts:
- Secured loan growth: 2.8% (mortgages)
- Total bank lending growth: 3.3%
- House price growth: 2%
- Mortgage market size (Oct 2025): £1.7 trillion
These figures suggest continued demand for secured lending, though growth remains limited due to income constraints and cost-of-living pressures.
Rate Outlook and Borrower Impact
Mortgage rates are expected to decline gradually in 2026. Forecasts indicate average rates will range from 2% to 4%, driven by anticipated Bank of England base rate cuts and falling swap rates. Some long-term fixed-rate products may still exceed 6%, especially for high-risk borrowers.
Tracker and variable-rate mortgage holders will likely benefit first from base rate reductions. Fixed-rate borrowers will only see changes once their current deals expire. Eased affordability checks introduced in 2025 allow more flexibility, especially on short-term fixes.
Lenders are now offering higher loan-to-income (LTI) multiples, in some cases up to 6× gross income. This significantly improves access for first-time buyers and existing homeowners. Combined with relaxed stress testing, borrowing power could rise by up to 24% in 2026.
In summary:
- Mortgage rate forecast: 2–4% (average); 6% (some long fixes)
- Improved affordability: Relaxed stress tests
- Increased loan capacity: Up to 6× income
- Potential rise in borrowing power: Up to 24%
Risk, Defaults, and Regulatory Shifts
The UK secured loans market remains stable despite economic pressure. Mortgage write-off rates are projected to stay extremely low at 0.002% in 2026. This reflects strong loan performance and conservative underwriting. Consumer loan defaults may increase slightly to around 1.0% due to softening in the labour market, but this is not expected to disrupt the sector.
Several regulatory changes introduced in 2025 have influenced market dynamics. Lenders now apply more flexible affordability assessments, especially for short fixed-term loans. This allows broader access while maintaining manageable risk levels. In addition, hybrid mortgage products with a mix of fixed and variable elements have gained popularity, offering borrowers more flexibility in uncertain rate conditions.
Five changes affecting secured loans in 2026:
- Mortgage write-off rate forecast: 0.002%
- Consumer loan default rate: 1.0%
- LTI caps increased to 6× income
- Affordability rules relaxed in 2025
- Growth in hybrid fixed/variable rate products
These developments create a more accessible market, particularly for borrowers with stable incomes and adequate equity.
What to Expect Moving Forward?
The outlook for secured loans in the UK remains cautiously positive beyond 2026. As inflation eases and interest rates continue to fall, borrowing conditions are expected to improve. Forecasts suggest stronger growth in 2027 and 2028, supported by stabilising real incomes and a more competitive lending market.
Lenders will likely continue offering flexible products and higher income multiples, especially in the mortgage sector. Borrowers who plan ahead could benefit from lower costs and wider access.
Monitor these trends:
- Gradual rise in secured loan demand from 2027
- More lenders adopting hybrid mortgage structures
- Expanding access through improved affordability models
- Continued stable credit quality across secured products
Summary of the Secured Loans Market in 2026
The secured loans market in the UK is expected to expand gradually in 2026, supported by improving rate conditions and regulatory flexibility.
Borrowers will benefit from higher loan-to-income limits and more accessible affordability tests, although overall growth remains modest due to real income pressures and cautious lending.
FAQs
- What is the secured loans market?
The secured loans market refers to all lending activity where the borrower provides an asset (usually property) as collateral. In the UK, this market is dominated by mortgages and second charge loans. These products allow lenders to offer higher loan amounts and longer terms due to lower risk. The market includes residential and commercial lending, typically regulated by the Financial Conduct Authority (FCA).
- How is the secured loans market performing in 2026?
In 2026, the UK secured loans market is forecast to grow at a net rate of 2.8%. This reflects moderate expansion driven by falling interest rates and eased affordability rules. Total bank lending is projected to grow 3.3%. House price growth is expected at 2%, supporting equity-based lending activity. Market growth remains constrained by real income pressures.
- What affects the size and growth of the secured loans market?
The size of the secured loans market depends on several factors: base interest rates, house prices, inflation, regulatory policies, and borrower affordability. Changes in the Bank of England base rate, lender stress testing rules, and household income trends have a direct impact on secured loan availability and demand.
- Are mortgage rates expected to drop in 2026?
Yes. Forecasts suggest average UK mortgage rates will fall to between 2% and 4% in 2026, depending on loan term and product type. This drop is driven by expected Bank of England base rate cuts and lower swap rates. Some long-term fixes may still exceed 6%, especially for higher-risk profiles.
- Whobenefitsfrom changes in the secured loans market?
First-time buyers and remortgaging homeowners benefit the most from relaxed affordability checks and higher loan-to-income (LTI) ratios. In 2026, some lenders offer LTI multiples up to 6× income. This increases borrowing capacity, particularly for applicants with stable earnings and good credit history.
- What are the risks in the current secured loans market?
Mortgage risk levels remain low. The 2026 write-off rate for residential loans is forecast at just 0.002%. Consumer loan defaults may rise to 1.0% due to weaker employment conditions, but overall secured loan portfolios remain healthy. Lenders continue to prioritise low-risk borrowers with strong equity positions.
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