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.

Major banks and building societies such as HSBC and Coventry Building Society have already started hiking rates and brokers expect more to follow.

David Hollingworth, associate director at L&C Mortgages, said: “The conflict in the Middle East has led to market expectation of higher inflationary pressure causing rate cuts to be slowed or put on hold. That pushes up the cost for lenders when pricing their fixed rate mortgages, which can force rates higher.

“Once we enter this cycle of lenders adjusting their rates, we know that it almost invariably results in others following suit. The current uncertainty means that this upward pressure doesn’t look likely to ease quickly, although there are signs that the market reaction is at least levelling off for now.

“In the short term it’s likely that these increases will not see mortgage costs rocket but it does look like the improvements made in recent weeks could unwind quickly. With such an unpredictable backdrop, those borrowers that are considering a new fixed rate deal at the moment should be looking to secure the rate sooner rather than later.”

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 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.

Some lenders have even cancelled planned rate cuts.

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

Moneyfacts suggests more are likely to follow.

Adam French, head of consumer finance at Moneyfacts, said: “Conflict across the Middle East means the Bank of England is likely to resist any temptation to cut the base rate for now and instead hold steady until the economic effects become clearer. 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.

“Lenders are already beginning to change plans and reprice products in response to the likelihood of rates remaining at their current level, or higher, for longer than had been expected.”

The average two-year fixed residential mortgage rate is 4.84%, as of 6 March 2026, meanwhile, the average five-year fixed rate is at 4.96%.

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 3.55% for home movers, available from Yorkshire Building Society at up to 60% LTV.

Lloyds Bank has a market-leading remortgage rate of 3.64% 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 Bank of England’s Monetary Policy Committee (MPC) narrowly voted by 5-4 to hold the base rate at 3.75%. Four dissenters voted to cut it to 3.5% so there is hope for a change in the coming months. In the longer-term, HSBC predicted the base rate will fall to 3% by the end of 2026 as inflation slows further. This 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 an eye-watering 7.13% as of 6 March, according to Moneyfacts. The average two-year tracker is at 4.39%.

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.

Anyone holding out for interest rates to fall further could opt for a tracker mortgage.

Hollingworth 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 6 March, the average two-year buy-to-let mortgage rate is 4.65%, while the average five-year BTL rate is 5.04%, according to Moneyfacts.

These rates seem 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.

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.