Will mortgage rates fall this year?
Major lenders are starting to increase mortgage rates again. Whether you're buying a home, remortgaging or you’re a buy-to-let landlord, we look at the outlook for 2026.
Mortgage rates have been climbing again amid renewed tensions between the US and Iran and political uncertainty in the UK.
The average two-year fixed-rate deal is now 5.62% as of 28 July, up from 5.48% at the start of the month, according to financial data firm Moneyfacts.
It comes as swap rates, the wholesale cost of borrowing for banks and lenders, have increased in recent weeks.
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This has been driven by the appointment of new UK Prime Minister Andy Burnham, who has slightly rattled markets by saying he would seek flexibility in the government’s fiscal rules.
Additionally, oil prices have gone back above $100 a barrel amid Middle East tensions, which has also made lenders nervous and pushed rates higher.
Halifax, HSBC and Barclays are among lenders who have hiked their mortgage rates in recent weeks.
Why are mortgage rates rising?
Mortgage pricing is linked to swap rates, which essentially reflect the wholesale cost of funding for banks and lenders and affect how they price credit such as loans and mortgages.
There is plenty to make lenders nervous at the moment.
The tensions in the Middle East have stoked fears that inflation could rise, thereby pushing up swap rates.
Plus, there is political uncertainty about new Prime Minister Burnham’s tax and spending plans.
Matt Coulson, founder at advice firm Heron Financial, said: “We're back in the volatile space we saw earlier this year, with tension in the Middle East and the oil price feeding straight into swap rates, and borrowers feeling it almost immediately. Lenders price off swaps rather than Bank Rate, so when those jump, repricing follows within days.”
Whether mortgage rates will fall again will depend on the financial markets and also interest rates.
At the start of July, financial markets were expecting the Bank of England to hold interest rates at 3.75% for the rest of 2026, which could keep rates high.
Should you fix your mortgage?
A fixed-rate mortgage offers you peace of mind that your interest rate won’t change throughout the course of the deal.
With rates rising, now may be a good time to lock in a rate before pricing gets higher.
Stephen Perkins, managing director at Norwich-based mortgage broker Yellow Brick Mortgages, urged anyone waiting to lock into a mortgage to do so now.
He said: "For borrowers, mortgage pricing can change quickly. Waiting in the hope of securing a slightly lower rate can sometimes have the opposite effect if market conditions move against you. We refer to that as the 'waiting penalty'."
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.
“Anyone remortgaging should secure a rate now, as most lenders will let you switch to a lower deal if pricing improves before completion, so you get the protection without losing the upside,” said Nick Mendes, mortgage technical manager at broker John Charcol.
“For buyers, if you see a property you like and it's affordable, don't delay. Holding off in the hope of a slightly cheaper rate risks missing out on the right home altogether, and that disappointment tends to outlast any small saving on the rate,” he added.
What about variable mortgage rates?
Standard Variable Rate (SVR) mortgages – the ones borrowers tend to roll onto once their fixed-rate deal comes to an end – are still an expensive option. The average SVR was 7.13% as of 28 July, according to Moneyfacts.
Those on a high SVR would be wise to switch onto a fixed-rate deal now to provide lower repayments.
If you think rates may drop, you could also opt for a tracker mortgage which more directly follows the Bank of England base rate.
Plenty of tracker mortgages also come with no Early Repayment Charges (ERCs), so you can make an overpayment penalty-free.
Lisa Parker, from broker L&C Mortgages, said: “Tracker mortgages have become increasingly popular as rates have fallen and fears of potential rises have eased, offering borrowers the opportunity to benefit if rates drop further. However there’s no guarantee that will happen, so it’s important to consider how you’d cope if your payments started to rise.”
What about buy-to-let mortgage rates?
Buy-to-let fixed-rate mortgage rates have also increased in recent weeks.
The average two-year rate has risen to 5.31%, up from 5.22% at the start of the month.
That is higher than at the outset of the war in Iran – the average two-year rate was 4.65% on 2 March.
Despite buy-to-let mortgage rate increases in recent months, they are still considered competitive compared to how high they have been over the past few years. In the summer of 2023 they were pushing 7%.
Landlords looking for a new mortgage deal will be hoping for further falls in mortgage rates in 2026, 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% in 2026.
Just over five million households are projected to see their mortgage repayments increase when they refinance by the end of 2028, according to the Bank of England’s most recent Financial Stability Report.
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.
About 1.7 million mortgages have benefitted from the mortgage charter since it was introduced in June 2023, according to the City watchdog.
The charter is a series of support measures intended to help those in difficulty. Borrowers can 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 also have the option to revert to their original term within six months by contacting their lender.
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.
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.”
