Atom bank issues 2026 forecasts for residential and commercial mortgage markets

19 December 2025

Chris Storey, Chief Commercial Officer, Atom bank provides his thoughts on the residential and commercial mortgage market as we head into the new year.

Residential

“After two years of market volatility, 2026 looks set to deliver a crucial period of stability and improved access. The consensus forecast of the Base Rate settling around 3.25% to 3.5% means typical fixed mortgage rates are expected to stabilise near 4%. This could finally make affordability calculations work again for a significant number of aspiring homeowners.

“While transactions are forecast to hold steady, the most important shift is the geographic rebalancing of the market. We expect the North West and the Midlands to demonstrate the strongest price growth and transactional activity in 2026. Lenders need to follow this momentum and ensure their products are competitive in these crucial regional markets.

“The coming 12 months will also need broader support from lenders for those with smaller deposits. The rate of house price growth may have slowed, but they are still rising, and with living costs rising too, the challenge of building a large deposit is more difficult than ever. As an industry, we need to support those who are more than capable of repaying a mortgage, but haven’t had the good fortune to be able to build a sizable deposit, be that due to increasing living costs or the lack of family help.

“The greatest challenge remains the refinancing burden. With UK Finance forecasting 1.9 million fixed rates will be maturing, borrowers rolling off historic low fixes will face increased payments. This, combined with the continued affordability squeeze, means the demand for Near Prime mortgages will grow. We have seen record levels of activity this year at Atom, and while some of this can be attributed to the enhancements we’ve made to our range, I think it also reflects the fact brokers are seeing more clients who have gone through some sort of payment issue in the recent past. As an industry, we must be more flexible with these borrowers and actively provide a clear path back to Prime. Given the number of middle-income borrowers involved in one off payment blips, the lenders who focus on product innovation and fair pricing in this area will be best positioned to support the UK's homeownership ambitions in 2026.”

Commercial

“The last year has been one of nuance within the commercial lending space. While brokers have reported increased caution among some of their SME clients - particularly in the run up to the Budget - there has been strong interest from certain areas of the market, such as hotels, factories, warehouses and wholesale traders. That we have broken our own monthly and quarterly records for the value of commercial mortgage offers at the end of 2025 highlights that demand is there, but it’s within specific subsectors of the commercial mortgage space.

“The commercial lending landscape in 2026 is moving from a story of caution to one of measured momentum. With debt costs falling and capital values stabilising, debt is once again becoming a value-enhancing tool rather than purely a survival mechanism. We anticipate that this shift will unlock significant pent-up investment demand from UK SMEs looking to optimise their assets.

“I would anticipate that investment will be highly strategic. The 2026 business rates revaluation is a significant new pressure point, with average rateable values soaring, particularly in sectors like logistics and hospitality. This creates an urgent imperative and the flight to quality properties may intensify. Businesses may seek to consolidate into smaller, high-specification, energy-efficient premises to offset rising operational and tax burdens.

“While there is optimism for a broader recovery, sector performance will remain polarised. Logistics and industrial property will continue to attract investment due to resilient demand from e-commerce, while the best Grade A office space will thrive. Conversely, older, less efficient assets will face difficulties, driving a strong need for finance geared towards green retrofitting and repositioning. Atom bank is firmly committed to providing the flexible, high value funding required to support these vital investment decisions and help UK businesses navigate the new operating cost dynamic.”