Will mortgage rates come down in 2026?
Will mortgage rates come down in 2026?
by Mark Forbes - 3rd March 2026
by Mark Forbes
3rd March 2026
Blog Article
Blog Article
With so much uncertainty in the mortgage market over the last few years, we break down what’s actually happening with UK interest rates, and where they are expected to settle.
With so much uncertainty in the mortgage market over the last few years, we break down what’s actually happening with UK interest rates, and where they are expected to settle.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Introduction:
Is 2026 Finally the Year for Mortgage Stability?
Introduction:
Is 2026 Finally the Year for Mortgage Stability?
If you are looking to secure a new mortgage in 2026, you are likely feeling a mix of frustration and uncertainty. Over the last few years, household budgets across Scotland and the wider UK have been stretched as the cost of daily life increased year after year. Deciding whether to lock in a new rate for a short period or secure your monthly payments for a longer stretch is one of the biggest financial decisions you can make. To help you make this choice, it’s important to think about what has happened to rates over the last few years, where the mortgage market sits right now, and what is expected to happen next.
If you are looking to secure a new mortgage in 2026, you are likely feeling a mix of frustration and uncertainty. Over the last few years, household budgets across Scotland and the wider UK have been stretched as the cost of daily life increased year after year. Deciding whether to lock in a new rate for a short period or secure your monthly payments for a longer stretch is one of the biggest financial decisions you can make. To help you make this choice, it’s important to think about what has happened to rates over the last few years, where the mortgage market sits right now, and what is expected to happen next.
Why did mortgage rates go up so fast?
Why did mortgage rates go up so fast?
To understand where your monthly payments are heading in 2026, it helps to look back at what happened with rates from late 2021 onwards. Back then, rates sat at historically low levels, and had done for a number of years.
Towards the end of 2021, the underlying rates that lenders use to “buy money” for their fixed rate mortgage deals, known as SONIA swap rates, started trending upwards. These wholesale swap rates are highly sensitive to speculation in the markets, and this led to a sharp upward spikes as the financial environment tightened rapidly. The Bank of England base rate followed this upward trend, but it rose in more controlled steps over a longer period of time, but broadly in line with what analysts expected. Meanwhile, the average rates offered to mortgage customers climbed steadily too, causing a lot of worry to people looking for new deals – especially for those with very low rates coming to an end.
This upward surge reached a peak around mid-2023. During this period, a very unusual situation occurred in the financial markets, with short term fixed rate mortgage rates being priced higher than longer term fixed rates. The 2-year average mortgage peaked in the mid-5% area, while the 5-year average mortgage peaked lower around the high-4% zone. The Bank of England base rate peaked at a 5.25% in August 2023, and remained at that level for the next year.
To understand where your monthly payments are heading in 2026, it helps to look back at what happened with rates from late 2021 onwards. Back then, rates sat at historically low levels, and had done for a number of years.
Towards the end of 2021, the underlying rates that lenders use to “buy money” for their fixed rate mortgage deals, known as SONIA swap rates, started trending upwards. These wholesale swap rates are highly sensitive to speculation in the markets, and this led to a sharp upward spikes as the financial environment tightened rapidly. The Bank of England base rate followed this upward trend, but it rose in more controlled steps over a longer period of time, but broadly in line with what analysts expected. Meanwhile, the average rates offered to mortgage customers climbed steadily too, causing a lot of worry to people looking for new deals – especially for those with very low rates coming to an end.
This upward surge reached a peak around mid-2023. During this period, a very unusual situation occurred in the financial markets, with short term fixed rate mortgage rates being priced higher than longer term fixed rates. The 2-year average mortgage peaked in the mid-5% area, while the 5-year average mortgage peaked lower around the high-4% zone. The Bank of England base rate peaked at a 5.25% in August 2023, and remained at that level for the next year.
What is happening with mortgage rates in 2026?
What is happening with mortgage rates in 2026?
Thankfully, the volatility of 2023 eventually subsided. Swap rates began to reduce, and so, in turn, did mortgage rates. Over the next few years, rates became much less volatile meaning less sudden changes to rates offered by lenders.
By the end of December 2025, the picture looks vastly different from the 2023 peaks. The Bank of England base rate has stepped down 0.25% every 3-4 months, and finished the year at 3.75% - it’s lowest level since early 2023. The 2-year and 5-year swap rates sat below the base rate too, both in the mid-3% area, with the 5-year rate again returning to a slightly higher level than the 2-year rate. That relationship, with swaps sitting under the base-rate level, is a vital cue for the direction that the market expects rate to take over the next few years.
For anyone looking for a new mortgage deal, this market cooling has meant very little difference in the rates offered for 2-year and 5-year fixed rate mortgage products. The gap we saw in 2023, where 2-year rates exceeded 5-year rates by a wide margin, has been wiped out.
Thankfully, the volatility of 2023 eventually subsided. Swap rates began to reduce, and so, in turn, did mortgage rates. Over the next few years, rates became much less volatile meaning less sudden changes to rates offered by lenders.
By the end of December 2025, the picture looks vastly different from the 2023 peaks. The Bank of England base rate has stepped down 0.25% every 3-4 months, and finished the year at 3.75% - it’s lowest level since early 2023. The 2-year and 5-year swap rates sat below the base rate too, both in the mid-3% area, with the 5-year rate again returning to a slightly higher level than the 2-year rate. That relationship, with swaps sitting under the base-rate level, is a vital cue for the direction that the market expects rate to take over the next few years.
For anyone looking for a new mortgage deal, this market cooling has meant very little difference in the rates offered for 2-year and 5-year fixed rate mortgage products. The gap we saw in 2023, where 2-year rates exceeded 5-year rates by a wide margin, has been wiped out.
What type of mortgage deal should I take in 2026?
What type of mortgage deal should I take in 2026?
There are a number of points to consider when planning your household budget and deciding if you are better to fix for 2 or 5 years. First, swap rates are not expected to return to the near-zero levels of 2021. Instead, it is expect that they will settled in the mid-3s for the next several years.
Second, the current trends point toward a period of relative rate stability rather than large moves like those seen between 2021 and 2023. Because the 2-year and 5-year swap rates are very close and the spread between them is small, the expectation is for additional easing in the Bank of England Base Rate, with it settling slightly lower than the current level.
For you, as a mortgage borrower, this indicates that average mortgage rates appear poised for a "low-4% new normal”. The market reveals a repeated pattern where mortgage rates tend to hover at a premium to swaps and adjust gradually. With the underlying swap rates sitting in the mid-3s, mortgage averages sitting in the low-4s is consistent with this historic relationship. Since the cost of an average 2-year fixed and a 5-year fixed is now nearly the same, it shows that the different parts of the market are meeting in the middle and settling into a steady, predictable pattern.
There are a number of points to consider when planning your household budget and deciding if you are better to fix for 2 or 5 years. First, swap rates are not expected to return to the near-zero levels of 2021. Instead, it is expect that they will settled in the mid-3s for the next several years.
Second, the current trends point toward a period of relative rate stability rather than large moves like those seen between 2021 and 2023. Because the 2-year and 5-year swap rates are very close and the spread between them is small, the expectation is for additional easing in the Bank of England Base Rate, with it settling slightly lower than the current level.
For you, as a mortgage borrower, this indicates that average mortgage rates appear poised for a "low-4% new normal”. The market reveals a repeated pattern where mortgage rates tend to hover at a premium to swaps and adjust gradually. With the underlying swap rates sitting in the mid-3s, mortgage averages sitting in the low-4s is consistent with this historic relationship. Since the cost of an average 2-year fixed and a 5-year fixed is now nearly the same, it shows that the different parts of the market are meeting in the middle and settling into a steady, predictable pattern.
What could impact rate forecast this year?
What could impact rate forecast this year?
While the data points toward a stable, settled market in the low-4% range, it is vital to remember that financial forecasts are highly sensitive to the broader economic and political picture, both in the UK and the wider world markets. The wholesale money markets that dictate your mortgage costs react sharply to global pressures, and several outside forces could disrupt these predictions over the coming years.
Inflation and the Cost of Living
The single biggest driver of a central bank’s policy is inflation. Base rates are the main tool used to control how fast prices rise across the economy. If global supply chains run smoothly and demand in the economy remains balanced, inflation stays manageable. This allows borrowing costs to stabilize just as the current forecasts predict. However, if unexpected events occur globally or the cost of raw materials spikes in different countries, the cost of everyday goods could rise again. If inflationary pressures return, central banks will be forced to keep interest rates higher for longer to cool the economy down. This would immediately push up the cost of new fixed-rate mortgage deals for buyers and homeowners alike.
Global politics and energy costs
The modern financial system is deeply interconnected. Instability in regions with high levels of oil and gas production can cause immediate shocks to global energy prices. When energy becomes more expensive, it increases the cost of nearly everything else, from transporting goods to your local supermarket, to heating our homes. During times of international tensions, global investors tend to seek out safe-haven assets, and these sudden shifts in funds can cause rapid and unpredictable changes in the wholesale swap markets. An international crisis can force lenders to raise their mortgage rates quickly to protect themselves against uncertainty, even if the UK economy is performing well.
Government borrowing and growth
How the government chooses to spend and borrow money also plays a huge part in what happens to mortgage rates. If a government decides to borrow heavily to fund new infrastructure projects or massive tax cuts, it usually increases the overall supply of bonds in the market. Large levels of government borrowing often pushes up the underlying cost of debt for everyone else, including the banks that provide your mortgage. However, if the economy stagnates and growth slows down entirely, the Bank of England might be forced to cut interest rates far more aggressively than currently forecast to encourage spending and support businesses.
While the data points toward a stable, settled market in the low-4% range, it is vital to remember that financial forecasts are highly sensitive to the broader economic and political picture, both in the UK and the wider world markets. The wholesale money markets that dictate your mortgage costs react sharply to global pressures, and several outside forces could disrupt these predictions over the coming years.
Inflation and the Cost of Living
The single biggest driver of a central bank’s policy is inflation. Base rates are the main tool used to control how fast prices rise across the economy. If global supply chains run smoothly and demand in the economy remains balanced, inflation stays manageable. This allows borrowing costs to stabilize just as the current forecasts predict. However, if unexpected events occur globally or the cost of raw materials spikes in different countries, the cost of everyday goods could rise again. If inflationary pressures return, central banks will be forced to keep interest rates higher for longer to cool the economy down. This would immediately push up the cost of new fixed-rate mortgage deals for buyers and homeowners alike.
Global politics and energy costs
The modern financial system is deeply interconnected. Instability in regions with high levels of oil and gas production can cause immediate shocks to global energy prices. When energy becomes more expensive, it increases the cost of nearly everything else, from transporting goods to your local supermarket, to heating our homes. During times of international tensions, global investors tend to seek out safe-haven assets, and these sudden shifts in funds can cause rapid and unpredictable changes in the wholesale swap markets. An international crisis can force lenders to raise their mortgage rates quickly to protect themselves against uncertainty, even if the UK economy is performing well.
Government borrowing and growth
How the government chooses to spend and borrow money also plays a huge part in what happens to mortgage rates. If a government decides to borrow heavily to fund new infrastructure projects or massive tax cuts, it usually increases the overall supply of bonds in the market. Large levels of government borrowing often pushes up the underlying cost of debt for everyone else, including the banks that provide your mortgage. However, if the economy stagnates and growth slows down entirely, the Bank of England might be forced to cut interest rates far more aggressively than currently forecast to encourage spending and support businesses.
The bottom line:
Make the right call for you.
The bottom line:
Make the right call for you.
The wild ups and downs that defined the mortgage market over the last 4-5 years years appear to be levelling out, with the once-massive pricing gap between short and long-term fixed rate deals almost entirely vanished. With 2-year and 5-year average mortgage rates now sitting very close to each other, choosing between them is no longer simply about simply asking “what is the best mortgage rate”.
Instead, the decision comes down to your personal plans and circumstances, such as if you may look to move house in the near future, if you plan to increase or reduce your mortgage borrowing, or where you prefer the peace of mind in knowing exactly what your mortgage payments will be until the end of the decade. Taking the time to consider your future plans, and speaking with a qualified mortgage broker, is the best way to ensure you lock in the deal that works best for you.
The wild ups and downs that defined the mortgage market over the last 4-5 years years appear to be levelling out, with the once-massive pricing gap between short and long-term fixed rate deals almost entirely vanished. With 2-year and 5-year average mortgage rates now sitting very close to each other, choosing between them is no longer simply about simply asking “what is the best mortgage rate”.
Instead, the decision comes down to your personal plans and circumstances, such as if you may look to move house in the near future, if you plan to increase or reduce your mortgage borrowing, or where you prefer the peace of mind in knowing exactly what your mortgage payments will be until the end of the decade. Taking the time to consider your future plans, and speaking with a qualified mortgage broker, is the best way to ensure you lock in the deal that works best for you.
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Contact Us
Talk to a mortgage adviser
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Choosing the right mortgage is about making confident decisions at the right time, with the right guidance behind you. That’s where we come in. No scripts, no generic advice, just thoughtful, experienced support designed to make the process feel straightforward and manageable.
If you’d like to explore what’s possible or simply have a question, we’re always happy to start the conversation.
If you’d like to explore what’s possible or simply have a question, we’re always happy to start the conversation.
If you’d like to explore what’s possible or simply have a question, we’re always happy to start the conversation.
You voluntarily choose to provide personal details to us via this website. Personal information will be treated as confidential by us and held in accordance with GDPR May 2018 requirements. You agree that such personal information may be used to provide you with details of services and products in writing, by email or by telephone.
By submitting this information you have given your agreement to be contacted by us to discuss your mortgage requirements.
Please see our Privacy Policy for further details on how we use your information.
You voluntarily choose to provide personal details to us via this website. Personal information will be treated as confidential by us and held in accordance with GDPR May 2018 requirements. You agree that such personal information may be used to provide you with details of services and products in writing, by email or by telephone.
By submitting this information you have given your agreement to be contacted by us to discuss your mortgage requirements.
Please see our Privacy Policy for further details on how we use your information.
You voluntarily choose to provide personal details to us via this website. Personal information will be treated as confidential by us and held in accordance with GDPR May 2018 requirements. You agree that such personal information may be used to provide you with details of services and products in writing, by email or by telephone.
By submitting this information you have given your agreement to be contacted by us to discuss your mortgage requirements.
Please see our Privacy Policy for further details on how we use your information.
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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
MOST BUY-TO-LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
Advantage Home Finance is a trading name of Advantage Home Finance Limited who are an Appointed Representative of PRIMIS Mortgage Network, a trading name of Advance Mortgage Funding Ltd. Advance Mortgage Funding Ltd is authorised and regulated by the Financial Conduct Authority.
View our complaints procedure here.
Initial mortgage consultation is free.
We may charge a fee for our advice service which will depend on what mortgage you need, your financial circumstances, and the complexity of what you want. The amount of fee will be between £0 and 1% of the value you need to borrow up to a maximum of £2,000. For example, if your mortgage was £100,000 the maximum fee you would pay would be £1,000. The minimum fee charged is £0. You need to pay the fee when your mortgage application has completed.
The guidance and/or information contained within the website is subject to UK regulatory regime and is therefore targeted at consumers based in the UK.
Registered in Scotland. Registration number – SC511364.
Registered office address – 80 George Street, Edinburgh, Scotland, EH2 3BU.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
MOST BUY-TO-LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
Advantage Home Finance is a trading name of Advantage Home Finance Limited who are an Appointed Representative of PRIMIS Mortgage Network, a trading name of Advance Mortgage Funding Ltd. Advance Mortgage Funding Ltd is authorised and regulated by the Financial Conduct Authority.
View our complaints procedure here.
Initial mortgage consultation is free.
We may charge a fee for our advice service which will depend on what mortgage you need, your financial circumstances, and the complexity of what you want. The amount of fee will be between £0 and 1% of the value you need to borrow up to a maximum of £2,000. For example, if your mortgage was £100,000 the maximum fee you would pay would be £1,000. The minimum fee charged is £0. You need to pay the fee when your mortgage application has completed.
The guidance and/or information contained within the website is subject to UK regulatory regime and is therefore targeted at consumers based in the UK.
Registered in Scotland. Registration number – SC511364.
Registered office address – 80 George Street, Edinburgh, Scotland, EH2 3BU.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
MOST BUY-TO-LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY
Advantage Home Finance is a trading name of Advantage Home Finance Limited who are an Appointed Representative of PRIMIS Mortgage Network, a trading name of Advance Mortgage Funding Ltd. Advance Mortgage Funding Ltd is authorised and regulated by the Financial Conduct Authority.
View our complaints procedure here.
Initial mortgage consultation is free.
We may charge a fee for our advice service which will depend on what mortgage you need, your financial circumstances, and the complexity of what you want. The amount of fee will be between £0 and 1% of the value you need to borrow up to a maximum of £2,000. For example, if your mortgage was £100,000 the maximum fee you would pay would be £1,000. The minimum fee charged is £0. You need to pay the fee when your mortgage application has completed.
The guidance and/or information contained within the website is subject to UK regulatory regime and is therefore targeted at consumers based in the UK.
Registered in Scotland. Registration number – SC511364.
Registered office address – 80 George Street, Edinburgh, Scotland, EH2 3BU.