Will mortgage rates fall this year?
Hopes of lower mortgage rates in the coming weeks and months are looking less and less likely due to the conflict in the Middle East. Whether you're buying a home, remortgaging or you’re a buy-to-let landlord, we look at the outlook for 2026.
A swathe of the UK’s biggest high street banks have cut mortgage rates in recent weeks, although they still remain elevated compared to early 2026.
Home buyers would have been hoping for a fall in mortgage costs in 2026, but ongoing tensions in the Middle East since the end of February have put pricing into flux.
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What’s next for mortgage rates given the uncertainty? Here’s everything you need to know.
Which mortgage lenders have lowered rates?
An interest rate cut in December had helped mortgage pricing fall below 5% and even below 4% in some cases, prompting a drop in rates in the build up to the new year.
But the base rate has stayed at 3.75% since the start of 2026 and swap rates, which help determine the cost of fixed-rate mortgages, surged after the outbreak of the conflict in Iran.
This caused mortgage rates to rise rapidly, with the average mortgage rate rising from 4.9% on 26 February to 5.58% on 26 March, according to data firm Moneyfacts.
The rate of increase in swap rates has slowed in recent weeks, although they remain significantly higher than prior to tensions in the Middle East.
Despite this, a number of major UK banks have cut mortgage rates in recent weeks.
In mid-April, Santander reduced selected fix and tracker rates by up to 0.3 percentage points.
Also in mid-April, Barclays cut rates across more than 20 products by up to 0.36 percentage points. On 30 April, it introduced four new products, including one with a 3.96% interest rate.
Nationwide also cut rates on its two, three and five-year fixes for first-time buyers and home movers by up to 0.25 percentage points in April.
HSBC and TSB have also reduced rates on mortgages since the start of April.
Nick Mendes, mortgage technical manager at broker John Charcol, said while swap rates were still elevated year-on-year, lenders had become “less jumpy” with tensions in the Middle East easing slightly.
“Even a period of relative stability can give lenders more confidence to trim selected products, especially if they had previously priced in a bit of caution,” he said.
There is also a “competitive element” to recent mortgage repricing, Mendes added, with lenders trying to drive business.
“We often see targeted cuts even when swaps have not materially improved,” he said.
“These are not always a sign that funding costs have transformed; sometimes they are lenders adjusting margins, managing service levels, or trying to attract the right type of borrower.”
We reveal how to get the best deal when remortgaging.
What are swap rates?
Swap rates are agreed between financial institutions, like a lender and an insurance company, and refer to the rate of interest one agrees to pay the other in return for funds over a set period of time.
Ultimately, they reflect the wholesale cost of funding for banks that influences how they price credit such as loans and mortgages.
This means that if swap rates go higher, it’s more expensive for the lender to borrow and it will have to hike rates on its mortgage products.
Swap rates are based on what markets believe will happen to interest rates and inflation in the future.
With the ongoing conflict in Iran stoking fears that inflation could spike globally, leading to higher interest rates, this has seen swap rates rise.
In turn, lenders have been pushing up their mortgage rates as it becomes more expensive for them to borrow money.
What is the forecast for mortgage rates?
At the start of the year, the BoE had been expected to cut interest rates twice in 2026, including a cut at the MPC’s March meeting. However, the US-Israeli attack on Iran on 28 February scuppered these plans.
In its March meeting, the MPC voted unanimously to maintain interest rates at 3.75%, citing “a significant increase in global energy and other commodity prices” caused by the conflict in the Middle East.
March’s Consumer Price Index (CPI) inflation data, published on 22 April, showed prices rose at 3.3% on an annual basis, up from 3% the month before, largely driven by increases in transportation costs, especially motor fuels.
At its most recent meeting, in April, the MPC voted again to hold rates at 3.75%, by a majority of 8-1. Huw Pill, the MPC’s chief economist and executive director of Monetary Analysis, voted to hike interest rates to 4%.
The MPC's Monetary Policy Summary said: “The conflict in the Middle East means that prospects for global energy prices are highly uncertain. Monetary policy cannot influence energy prices but will be set to ensure that the economic adjustment to them occurs in a way that achieves the 2% inflation target sustainably. The policy stance required to achieve this will depend on the scale and duration of the shock, and how it propagates through the economy.”
Given the context, economists now believe the MPC is likely to hold rates in 2026, and perhaps even raise them.
Advisory firm Oxford Economics believes the MPC will hold rates where they are until 2027.
Meanwhile, Pantheon Macroeconomics expects interest rates to be hiked twice in 2026, followed by three cuts in 2027.
The Bank of England appeared to sound its concerns over future interest rates in its most recent Monetary Policy Summary report.
In it were three scenarios that could occur due to energy shocks caused by the Iran conflict, with the worst-case scenario suggesting inflation will peak at 6.2% in early 2027, in which case interest rates could rise as high as 5.25%.
Rachel Springall, finance expert at Moneyfacts, said: “It’s looking increasingly unlikely we will see a cut until 2027. However, borrowers will hope that the mortgage mayhem experienced over recent weeks will calm, but repricing could go both ways amid swap rate moves.”
What recent interest rate movements mean is that tracker and standard variable rate mortgages are unlikely to change much in the immediate term.
The story is slightly different for fixed-rate mortgages.
Should you fix your mortgage?
Recent falls in mortgage rates on fixed deals may not last long if peace talks in the Middle East stall and oil prices stay elevated, driving fears of future interest rate rises.
So, if you are one of the estimated 1.8 million people on a fixed-rate mortgage that is expiring this year, according to UK Finance, it could be a good idea to hedge your bets and fix now.
Fixed rates can offer you certainty over what you’ll pay in interest over the course of the deal, even if rates do rise.
Plus, under the Financial Conduct Authority’s (FCA) mortgage charter, you can lock in a new fixed-rate deal six months before your current one is due to end and then shift to another, more competitive one, later on.
Mendes, from John Charcol, said: “In this kind of market, the better approach is often to lock in an affordable option and then switch if pricing improves before completion.”
What about variable mortgage rates?
The average Standard Variable Rate (SVR) is 7.13% as of 1 May, according to Moneyfacts. The average two-year tracker is at 4.61% as of 1 May.
Those on a high SVR would be wise to switch onto a fixed rate now. Even if fixed rates fall further, the money saved from getting rid of an expensive SVR earlier could make it worth it.
You could also opt for a tracker mortgage which more directly follows the BoE base rate.
David Hollingworth, associate director at mortgage broker L&C Mortgages, said: “Anyone that is sitting on a standard variable rate because they are hoping for more drops in fixed deals should consider whether a tracker would be a better option.
“The SVR is likely to be substantially higher and even if fixed rates do reduce over time, each month on SVR could be costing a lot more.”
What about buy-to-let mortgage rates?
Buy-to-let fixed mortgage rates have soared due to unrest in the Middle East.
The average two-year rate was at 4.65% on 2 March, but as of 1 May sits at 5.37%, according to Moneyfacts. The five-year rate was at 5.04% on 2 March, but as of 1 May is 5.68%.
Overall buy-to-let product choice has fallen sharply since the start of the conflict in the Middle East too. On March 2, there were 5,696 buy-to-let mortgage products available but just 5,093 on 1 May, according to Moneyfacts.
Despite recent buy-to-let mortgage rate increases, they are still considered competitive compared to how high they have been over the past few years – they were pushing 7% in the summer of 2023.
Landlords will have been hoping for a fall in mortgage rates later this year to help offset the 5% stamp duty surcharge, less generous mortgage interest tax relief and higher income tax charges on property introduced in the 2025 Autumn Budget and coming into effect in April 2027.
Landlords have also had to ensure they meet the new Renters’ Rights Act rules, which came into force on 1 May. In addition, they will be expected to invest up to £10,000 to reach an EPC rating of C by October 2030. Growing costs could dampen the profitability of buy-to-let.
What mortgage support is available?
Mortgage rates are much higher than when many people would have last remortgaged. Some homeowners will be coming off rates as low as 1% or 2%.
If you’re struggling to make your mortgage repayments, the good news is that lenders representing 90% of the mortgage market have signed up to the government’s mortgage charter. They include the big banks like Halifax, HSBC and Santander and building societies like Nationwide, Leeds and Skipton.
The charter is a series of support measures intended to help those in difficulty. Borrowers will be able to make a temporary change to their mortgage for six months to give them some breathing space, such as switching to interest-only payments or extending their mortgage term to reduce their monthly payments. Customers have the option to revert to their original term within six months by contacting their lender.
About 1.7 million mortgages have benefitted from the mortgage charter since it was introduced in June 2023, according to the City watchdog.
Meanwhile, there is a 12-month delay before repossession proceedings can start against those who have missed payments. Regardless of whether your lender has signed up to the charter, all lenders also have a range of measures in place for customers experiencing difficulties.
Should I overpay my mortgage?
If you’ve got some spare cash and you're on a low rate, overpaying your mortgage can be a good way to protect yourself before your mortgage deal expires and you have to remortgage at a higher rate.
Our mortgage overpayment calculator shows how your monthly repayments will change and help you decide if it is worth it.
Recent research from finance broker Clifton Private Finance found someone on a £250,000 mortgage paying it off over 25 years at 5% could save £40,000 in interest and shave four years off the term by overpaying by just £150 a month.
“You can’t control the market, but you can control how you respond to it. Rates change, lenders adjust their products, and the wider environment is always shifting,” said George Abouzolof, senior mortgage advisor at Clifton.
“But choosing whether to overpay your mortgage, and by how much, is entirely within your control. It’s one of the few levers homeowners can pull to improve their long-term financial position.”
