Mortgage Rates are falling – what 2026 could mean for your next deal. Rate cuts, cheaper deals, and a potential boom?
A year ago, “waiting it out” felt like the only sensible mortgage strategy. Now, rates are finally edging down, lenders are competing again, and 2026 is shaping up to be a year where timing and preparation could genuinely save borrowers real money. The catch is that the best deals will not land evenly for everyone, so knowing what’s driving pricing, and what you can control, matters more than ever.
Here’s everything you need to know about where mortgage rates could go next in 2026, what lenders are doing right now, and how to position yourself for the best possible deal.
Interest rates and the market, where do you stand?
As of December 2025, the official UK base rate had fallen from 4% to 3.75%, after policymakers responded to a continued slowdown in the pace of price rises.
Mortgage rates have fallen over the past year, but global and economic uncertainty could slow further progress. Many borrowers still face higher costs when their current deals end.
Fixed-rate mortgages and recent trends
Over 80% of mortgage customers are on fixed-rate deals, where the interest rate stays the same until the deal expires, usually after two or five years. The average two-year fixed rate fell below 5% in August for the first time since September 2022, and rates have continued to edge down, with more falls expected early this year.
Rach Springall, finance expert at Moneyfacts, thinks “expectations are high for a booming market in 2026. Mortgage rates are lower year-on-year, and the choice of deals is abundant. First-time buyers are not being left behind by this progress."
Lender activity and product changes
As reported by Mortgage Strategy on 5th January, HSBC announced a series of mortgage rate changes, confirming that rates would be lowered across its UK residential existing customer switching range. This includes its two-year fixed fee saver products at 60%, 70% and 90% loan-to-value (LTV), and five-year fee saver products at 60%, 70%, 75%, 90% and 95% LTV.
HSBC also reduced rates across a wide range of products, including those aimed at first-time buyers, home movers, re-mortgagers, buy-to-let borrowers and international customers.
The impact on households
Property Eye reported comments from Adam French of Moneyfacts, stating that if the Bank of England’s base rate settles at around 3.5% in 2026, as current forecasts suggest, this could mark a return to a more ‘neutral’ interest rate environment. However, he cautioned that the impact on households will vary significantly.
Timing, he believes, will be critical.
UK Finance estimates that around 1.8 million fixed-rate mortgages are due to expire in 2026, many of which were taken out when rates were at historic lows. As these borrowers refinance, they are likely to face substantially higher monthly repayments, meaning the financial adjustment is far from over for many households.
How base rate changes affect mortgage pricing
In general, when the Bank of England cuts interest rates, mortgage rates also tend to fall. However, lenders ultimately control their own pricing, and changes to mortgage deals can often move ahead of, or lag behind, movements in the base rate.
Nicholas Mendes, Mortgage Technical Manager at Broker John Charcol, noted that much of the expected outlook for the base rate has already been priced into fixed-rate mortgages:
“The cheapest two-year and five-year fixes remain below the bank rate, reflecting expectations of further cuts. As a result, fixed mortgage rates are likely to fall by less than the bank rate from here, and by the end of 2026 could once again be priced above the bank rate as markets judge rates to be close to their long-term floor.”
What’s to come
Despite ongoing pressures, experts predict the UK mortgage market will strengthen in 2026, with further mortgage rate cuts expected in the coming weeks. Research reported by The Independent suggests first-time buyers are increasingly benefiting from looser lending criteria, with more deals available for those with smaller deposits.
The next Bank of England monetary policy meeting is scheduled for 5th February 2026, followed by further meetings on 19th March, 30th April, and 18th June, with each decision likely to play an important role in shaping market confidence, influencing mortgage pricing, and guiding borrowers as they plan their next financial move.
