As 2026 begins, many homeowners, first‑time buyers and landlords are trying to understand what the year might hold for the UK mortgage market. While no one can predict the future with certainty, current trends, official data and market expectations can offer a helpful sense of direction. 

Here we try to explain those developments, so you can feel more confident about the decisions ahead.

The Base Rate: A Key Influence on Mortgage Costs

The Bank of England’s base rate remains one of the most important factors shaping mortgage pricing. At the end of 2025, the rate was reduced to 3.75% as inflation eased and economic activity softened. 

Throughout 2026, the Monetary Policy Committee will continue reviewing the rate regularly, balancing inflation pressures with the wider health of the economy.

General market forecasts suggest the base rate may fall gradually over the year, with some projections placing it between 3.25% and 3.50% by December. These are only expectations, not guarantees, and economic conditions can shift quickly. 

Even so, a lower base rate often encourages lenders to reduce mortgage pricing, although they may not move at the same pace or by the same amount.

Mortgage Rates: A Gradual Easing Rather Than a Sudden Drop

Mortgage rates themselves are influenced by the base rate, but also by competition between lenders and broader economic confidence. As 2026 gets underway, average two‑year fixed residential rates are sitting in the mid‑4% range, noticeably lower than the peaks seen in recent years. 

Some lenders are offering shorter‑term fixed mortgage deals closer to the low‑4% range, depending on the borrower’s circumstances and the lender’s appetite for new business.

If the base rate continues to fall, mortgage pricing may ease further, but most analysts expect any reductions to be steady rather than dramatic. For many buyers and remortgagers, this could mean gradually improving affordability as the year progresses.

Buy‑to‑let mortgages are following a similar pattern, although they typically carry slightly higher rates due to different risk profiles. Tax and regulatory considerations continue to play a major role for landlords, which may limit rapid changes in lending volumes even if pricing becomes more competitive.

Lending Activity: A Stable but Cautious Market

According to the UK Finance Mortgage Market Forecast for 2026, total gross lending is expected to rise to around £300 billion, representing a modest 4% increase on the previous year. 

House purchase lending is forecast to grow slightly, while remortgaging is expected to see a more noticeable uplift, particularly among borrowers whose fixed‑rate mortgage deals are coming to an end.

Property transactions, however, are expected to fall slightly, by around 10,000, as affordability pressures continue to influence buyer behaviour. This does not point to a weak market, but rather a more cautious one, where both buyers and sellers are taking time to adjust to current mortgage conditions.

First‑Time Buyers: Opportunities and Challenges

For first‑time buyers, 2026 offers a mix of encouraging signs and ongoing hurdles. Lower base rates and increased competition among lenders may help improve affordability compared with the high‑rate environment of 2023 and 2024. 

However, deposit requirements and income thresholds remain significant factors in determining how much buyers can borrow. Lenders will continue to carry out detailed affordability assessments, so preparing early, understanding your budget, gathering documents and exploring fixed‑rate options, can make a meaningful difference.

Remortgaging: A Major Theme for the Year

One of the most significant trends for 2026 is the volume of remortgaging. Around 1.8 million fixed‑rate deals are expected to mature this year, creating a large pool of borrowers who may be looking to refinance. 

External remortgaging, where borrowers switch to a new lender, is forecast to grow by around 10%, while internal product transfers are also expected to rise slightly. With mortgage pricing gradually easing, many homeowners may find opportunities to secure more favourable terms, although this will depend on individual circumstances and market conditions at the time.

Buy‑to‑Let: A Market Finding Its Balance

Although new buy‑to‑let lending is expected to remain broadly flat, the sector remains active. Landlords will continue weighing rental yields against borrowing costs, and competitive pricing may help improve returns for some investors. 

However, tax and regulatory pressures remain important considerations, and these factors may continue to shape investment decisions throughout the year.

What All This Means for You

Whether you are buying your first home, remortgaging or considering a property investment, staying informed about base rate decisions and lender pricing will be essential. 

Reviewing your mortgage well before your current deal ends can help you understand your options, and first‑time buyers may benefit from preparing early for affordability checks. Landlords, meanwhile, should continue to consider both mortgage costs and the wider regulatory landscape when planning their next steps.

James Ashaye, Mortgage Adviser in Edmonton, North London said: 

“As we move through 2026, we’re seeing a mortgage market that is becoming more balanced and easier for customers to navigate than in recent years. While interest rates remain higher than the historic lows of the past, greater stability and increasing competition are creating more choice for buyers and homeowners. Taking the time to understand your options and seeking professional advice can make a real difference to securing a mortgage that fits both your budget and your longer-term plans.”

In Summary

Overall, 2026 is shaping up to be a year of steady, modest improvements in mortgage affordability. Base rate movements are likely to filter through to consumer pricing gradually, lending activity is expected to grow, particularly in the remortgage market and the housing market continues to move forward at a measured pace. 

Taking the time to understand your mortgage options and plan ahead can help you make confident decisions as the year unfolds.

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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Thomas Oliver UK LLP is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

Approved by The Openwork Partnership on 27/01/2026.

Sources: ukfinance.org.uk, ukfinance.org.uk, ukfinance-newsroom.prgloo.com, financialreporter.co.uk, djsresearch.co.uk, mpamag.com