Will mortgage rates fall this year?

Mortgage lending criteria has become more flexible but hopes of lower rates in 2026 may be dashed by the Iran conflict.

Home buyers and borrowers had benefited from falling mortgage rates at the start of the year but pricing has started to rise again and may remain high.

An interest rate freeze in February and inflation remaining above target were already reducing the prospect of the cost of borrowing falling in the coming weeks.

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But there is a new threat to mortgages amid higher swap rates due to escalating tension in the Middle East and the Persian Gulf.

A glut of major banks and building societies including Halifax and HSBC have already started hiking rates and pulling deals to reprice them.

Adam French, head of consumer finance at Moneyfacts, said: “Recent days have been some of the most turbulent in the UK mortgage market since the aftermath of the September 2022 mini-Budget. In the last 48 hours almost 500 residential mortgage products have been withdrawn as lenders reacted to rapidly rising swap rates.

“Many of these deals are likely to return within the next few days and weeks as lenders adjust their pricing to higher rate expectations,” he added.

What’s in store for the rest of 2026 though? We take a closer look at the outlook for the year.

Which mortgage lenders are lowering 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 was held in February and swap rates, which help determine the cost of fixed-rate mortgages, have been on the way back up since the escalation of tensions in Iran.

That means mortgage rates are more likely to be going up than down at the moment while some lenders have even cancelled planned rate cuts or pulled deals from the market entirely.

Lenders such as Gen H, Halifax, HSBC, Nationwide, Santander, West One and Coventry Building Society have announced selected fixed rate increases.

Moneyfacts suggests more are likely to follow.

“Conflict across the Middle East means the Bank of England (BoE) is likely to resist any temptation to cut the base rate for now and instead hold steady until the economic effects become clearer,” said French from Moneyfacts. “What is immediately obvious is the risk of adding fuel to what may prove to be a fresh inflationary spike far outweighs any benefit a rate cut could bring.”

The average two-year fixed residential mortgage rate is 5.01% as of 11 March; meanwhile, the average five-year fixed rate is at 5.09%.

While mortgage rates are on the rise, lenders are becoming more flexible on affordability criteria.

Lenders such as Nationwide and NatWest have boosted loan-to-income ratios to 6x in recent weeks.

Santander also recently released a 98% loan-to-value (LTV) mortgage for first-time buyers, meaning borrowers would only need a 2% deposit.

A couple of lenders have released 100% LTV mortgages in recent weeks, in a boost for first-time buyers struggling to get a deposit together.

Melton Building Society has unveiled a five-year fix at 5.99% for 100% LTV with a £199 application fee and then £199 cashback upon completion.

It is initially only available to clients who live in the East Midlands.

Hanley Economic Building Society also has a 100% LTV mortgage on offer with a rate of 5.79% fixed for five years aimed at people currently renting. It is available to people in the Stoke-on-Trent postcode and you need to have been renting for at least 12 months.

The lowest mortgage rate on the market is currently 3.81% for home movers, available from First Direct at up to 60% LTV, according to Moneyfacts.

Nationwide has a market-leading remortgage rate of 3.94% for a 40% deposit.

The best deals can disappear quickly though if there is lots of demand so borrowers should act fast if they are ready to buy or remortgage.

Looking to remortgage? We reveal how to get the best deal.

What is the forecast for mortgage rates?

At its latest meeting in February, the BoE’s Monetary Policy Committee (MPC) narrowly voted by 5-4 to hold the base rate at 3.75%. The four dissenters voted to cut it to 3.5%.

In the longer-term, HSBC has predicted the base rate will fall to 3% by the end of 2026 with expectations inflation will slow further. That said, both the MPC’s meeting and HSBC’s prediction took place before US-Israeli military strikes on Iran, on 28 February.

The latest Consumer Price Index (CPI) measure read 3.0% in January, down from 3.4% in December, according to the Office for National Statistics (ONS).

Stephanie Charman, chief executive of the trade body the Association of Mortgage Intermediaries, predicted the base rate settling around 3-3.25% in 2026. Any falls in the base rate should feed into mortgage rates.

But Tom Bill, head of UK residential research at Knight Frank, has warned that a prolonged conflict in the Middle East could dampen sentiment and delay rate cuts due to rising inflation.

He added: “That said, we have seen how quickly interest rate expectations can change this year, and the underlying weakness in the jobs market is one of several reasons that multiple cuts could come back onto the table in 2026, which would support demand. A lot hinges on the length of the conflict.”

Should you fix your mortgage?

If the past few years of rises and falls have told us anything, it's that predicting falls in mortgage rates is not an exact science. So, if you have one of the estimated 1.8 million fixed mortgage rates that is expiring this year, according to UK Finance, should you opt for another fixed deal?

Fixed rates can offer you certainty over what you’ll pay in interest over the course of the deal.

What about variable mortgage rates?

The average Standard Variable Rate (SVR) was 7.13% as of 1 March, according to Moneyfacts. The average two-year tracker as of 11 March was 4.41%.

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?

On 11 March, the average two-year buy-to-let mortgage rate was 4.66%, while the average five-year BTL rate was 5.07%, according to Moneyfacts.

These rates are quite competitive compared to how high they have been over the past few years. Buy-to-let mortgage rates were pushing 7% in the summer of 2023.

Landlords will be hoping for a further fall in mortgage rates 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.

What mortgage support is available?

Mortgage rates are much higher than when many people would have last remortgaged. Millions of 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.

What are swap rates?

Swap rates have had plenty of press since the start of the Iran conflict – but what are they, and why are they important for mortgage 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.