UK Finance warns Budget bank tax could lift mortgage rates

First time buyers face mortgage rate increases if Budget raises bank taxes — UK Finance

UK Finance has told HM Treasury that further bank-specific taxes could raise mortgage costs and limit how much banks lend. This is a UK-wide pricing risk that would also fall on first-time buyers in Scotland.

In its Autumn Budget 2026 submission, published on the 23rd September, the industry body urged the government to keep bank taxation stable rather than raise the Bank Corporation Tax Surcharge, the Bank Levy, or introduce a new sector windfall charge. It also opposed using changes to how commercial banks are paid interest on reserves held at the Bank of England as a back-door levy on the sector.

UK Finance said altering reserve remuneration could feed into mortgage and savings pricing and into how much banks can lend or invest. Separate coverage of the submission summarised the same warning: higher bank taxes could ultimately raise household borrowing costs and reduce lending capacity.

On competitiveness, the submission cites PwC analysis for UK Finance showing a model corporate and investment bank in London facing a total tax rate of 46.5% in 2026, against 42.2% in Amsterdam, 39.1% in Frankfurt, 29.0% in Dublin and 27.9% in New York. UK Finance argues a further UK surcharge would widen that gap.

The same package also sets out housing asks. UK Finance said UK first-time buyer numbers helped onto the ladder rose to 391,000 in 2025 from 332,000 in 2024, and called for the government to progress its proposed First-Time Buyer ISA. UK Finance put new residential house-purchase lending at £176.6bn in 2025, with roughly 83% (£146.1bn) outside Greater London.

Any UK-wide rise in mortgage pricing from bank-tax or reserve-pay changes would feed through to Scottish deals and make life even harder than it already is for first time buyers.

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UK Finance warns Budget bank tax could lift mortgage rates

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