2026 is shaping up to be one of the most competitive years for UK mortgage deals since 2022. Here's what's driving rates, what the experts are predicting, and what it means for you as a buyer or remortgager.
If you've been holding off on buying or remortgaging while waiting for mortgage rates to fall, the picture in 2026 is cautiously encouraging. Rates have come down significantly from their 2023–2024 peak, product choice is at an 18-year high, and lenders are actively competing for business. But the path forward is nuanced — dramatic overnight drops are unlikely, and the picture varies depending on the type of product you choose.
The Bank of England cut its base rate from 4% to 3.75% in December 2025, and held it at 3.75% at its March 2026 meeting. This followed four successive cuts during 2025, bringing the rate down from 4.75%. Average UK mortgage rates as of early 2026 sit at around 4.9% — still above the sub-2% levels seen before 2022, but meaningfully below the painful highs of 2023. Some lenders have already moved close to the 3.5% mark on their most competitive fixed deals.
Why don't mortgage rates simply follow the base rate? Fixed-rate mortgages are priced primarily off swap rates — financial instruments that reflect what markets expect interest rates to be in the future. This means fixed deals can improve or worsen before the Bank of England even meets. It also means some good news can already be "priced in" before a base rate cut actually happens.
Economists and market analysts broadly expect the Bank of England to make one to two further base rate cuts during 2026, with most forecasts pointing towards a base rate of 3.0–3.25% by the year end, provided inflation continues on a downward path. Money markets are currently pricing in roughly an 80% chance of the base rate reaching 3.25% by November 2026.
For fixed mortgage rates, forecasters suggest a slow and measured decline rather than a sharp drop. Five-year fixed rates could gradually move towards 3.5–3.8% by late 2026, while two-year fixed rates — which tend to react more quickly to base rate changes — are expected to be keener still.
- 2-year fixed rate: approximately 4.5–5.0% — gradual decline likely through 2026
- 5-year fixed rate: approximately 4.3–4.8% — gradual decline likely through 2026
- Tracker mortgage: Bank of England base rate plus lender margin — falls with each BoE cut
- Standard Variable Rate (SVR): typically 7–8%+ — avoid if at all possible
A key wildcard in the 2026 outlook is geopolitical instability, particularly ongoing conflict in the Middle East. Several major banks have signalled they may scale back their rate-cut forecasts if the conflict continues to push oil prices higher and feed inflation. This uncertainty is one reason some lenders have nudged rates upward in early 2026 even as the base rate sits at a three-year low. It's a reminder that rate movements are never entirely predictable.
This is the question everyone is asking — and the honest answer is that there is no universally right answer.
Waiting for rates to fall further carries real risk: if you're currently on a Standard Variable Rate (SVR), you could be paying 7–8% or more while waiting for a theoretical improvement. If your current deal is ending soon, locking in a competitive fixed rate now protects you from volatility, and most lenders allow you to apply up to six months in advance. If rates do subsequently fall before completion, your broker can often switch you to a better deal without penalty.
For buyers in 2026, the overall environment is more favourable than it has been since 2022. House prices are forecast to rise modestly, meaning delaying your purchase to chase a slightly lower rate could result in paying more for the same property.
- The Bank of England base rate is 3.75% as of March 2026
- Mortgage rates are forecast to decline gradually, not dramatically, through 2026
- Fixed rates are priced off swap rates — they don't automatically follow the base rate
- Two-year fixes are currently keener than five-year deals in many cases
- Geopolitical uncertainty remains a risk to the rate forecast
- Rolling onto your lender's SVR is almost always more expensive than remortgaging
Not sure whether to fix, track, or wait? At Friends Capital, we compare the whole of the market to find the right deal for your specific circumstances. Visit www.friendscapital.co.uk or call us for a free, no-obligation rate review.