Will mortgage rates fall this year?
Some major lenders have cut mortgage rates in recent weeks. Whether you're buying a home, remortgaging or you’re a buy-to-let landlord, we look at the outlook for 2026.
Easing tensions between the US and Iran brought down mortgage rates over recent weeks – but where could they go next?
The average two-year fixed-rate deal was close to 6% in April, but now sits at 5.48% as of 8 July, according to financial data firm Moneyfacts.
Swap rates, the wholesale cost of borrowing for banks and lenders, have fallen and lenders are now competing for business.
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Nationwide, Virgin Money and Santander are just a few who have cut mortgage rates in recent weeks – but with the market still volatile, you might be wondering what to do if your deal is coming to an end.
Rachel Springall, finance expert at Moneyfacts, said: “It’s encouraging to see lenders continue to cut fixed mortgage rates.”
Springall added that lenders will follow any sudden shifts to swap rates over the coming weeks.
“The movement in rate pricing shows how sensitive the markets are to global and political turmoil, so borrowers looking for a new deal will be hoping for stability.”
Why are mortgage rates falling?
The outset of the US and Israeli conflict with Iran at the end of February caused swap rates to rise, in turn pushing up mortgage rates.
Swap rates essentially reflect the wholesale cost of funding for banks and lenders and affect how they price credit such as loans and mortgages.
If future inflation is expected to spike, which tends to lead to a rise in interest rates, this can cause swap rates to increase.
The tensions in the Middle East stoked fears inflation could rise, thereby pushing up swap rates.
Relations between the US and Iran have eased somewhat over recent weeks, which has caused swap rates to fall – though as of 8 July, the conflict appears in danger of restarting, which could see them go up again.
Nevertheless, falling swap rates in recent weeks have given lenders more room to cut their mortgage rates.
Whether mortgage rates will fall much further as 2026 wears on is unlikely. 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.
A lot is dependant on how the conflict in the Middle East plays out. As we have seen, the situation is volatile and subject to change at any minute.
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 falling, you might be sitting tight and waiting for them to drop further so you can lock in the cheapest possible deal.
However, Nick Mendes, mortgage technical manager at broker John Charcol, said it’s not worth doing this as “trying to time the absolute bottom of the market is impossible”.
“Waiting for rates to fall further can easily cost more than it saves,” Mendes said.
Under the Financial Conduct Authority’s (FCA) mortgage charter, you can also 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,” Mendes said.
“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 1 July, according to Moneyfacts.
Those on a high SVR would be wise to switch onto a fixed-rate deal 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 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 dropped in recent weeks, offering some positive news for under-siege landlords.
The average two-year rate was 5.22% as of 8 July, down from 5.31% on 10 June. However, they’re still higher than at the outset of the war in Iran: the average two-year rate was 4.65% on 2 March.
Buy-to-let product choice has also risen slightly in recent weeks. On 18 May, there were 5,052 BTL mortgage products available, according to Moneyfacts, but 5,251 as of 7 July.
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 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.”
