Will mortgage rates drop in the UK during 2026?
Mortgage interest rates are predicted to continue to fall throughout 2026 as the mortgage price war gathers pace in early 2026 as lenders increase offers to entice new customers and the Bank of England is expected to cut the base interest rate further.
According to forecasts from mortgage broker Tembo Money, inflation is expected to ease towards 2.5% by the end of 2026, giving the Bank of England scope to cut the base rate further, potentially as low as 3.25%. As a result, mortgage rates could dip below 3.5% during 2026, with lenders already competing aggressively after mortgage product availability hit its highest level in 18 years. While rate cuts are likely to be gradual rather than dramatic, this competitive environment is creating a clear window of opportunity for buyers and remortgagers willing to act strategically rather than wait for the “perfect” deal.
Top Tip: Use our mortgage repayment calculator to see how much of a difference interest rate changes will make to your monthly payments.
How to Take Advantage of the 2026 Mortgage Price War
Early 2026 is shaping up to be one of the most competitive periods in the UK mortgage market in years. Several major lenders have already begun cutting fixed mortgage rates, with early signs that a broader mortgage price war could develop as the year progresses.
While headline rates are grabbing attention, making the most of this environment requires careful timing, smart comparisons, and an understanding of how lenders behave when competition heats up.
What Is the Mortgage Price War?
The UK mortgage price is great for house buyers becuase lenders aggressively reduce rates to win market share, meaning you pay lower mortgage payments. This often follows Bank of England base rate cuts and typically starts with fixed-rate mortgages before filtering through the wider market.
In early 2026, mortgage lenders have already reduced rates close to the psychologically important 3.5% level, with at least one sub-3.5% deal appearing for select borrowers. Historically, when one major lender moves, others tend to follow.
Rates are unlikely to fall sharply in one go. Instead, competition usually plays out through gradual reductions, special offers, and tighter eligibility criteria.
One of the biggest advantages borrowers have right now is time. Most mortgage offers last between three and six months.
If you are buying or remortgaging, you can use a mortgage broker like Habito:
- Secure the best available deal now
- Monitor the market
- Reapply if rates improve before completion
This approach protects you from sudden rate rises while keeping you exposed to potential cuts if the price war intensifies.
How To Get The Best Mortgage Deal In 2026?
The best way to take advantage of the mortgage price war is to use a mortgage broker to help you secure the best rate and deal.
But, always check the details after beyond the headline rate, ultra-low rates often come with higher arrangement fees, which can wipe out the apparent savings, especially on smaller mortgages.
Always assess:
- Total cost over the fixed period
- Fees versus interest savings
- Flexibility (overpayments, porting, exit charges)
In a price war, the cheapest rate is not always the best value.
Is It Cheaper To Get A Fixed, Tracker or Variable Mortgage in 2026?
Fixed-rate mortgages benefit first when lenders compete. If your deal is ending or you are buying soon, fixed rates currently offer the best balance of certainty and value.
Tracker mortgages won’t fall until the base rate does. With further base rate cuts expected later in 2026, trackers may become more attractive – but timing matters.
Standard Variable Rates (SVRs) remain significantly higher than new deals. Falling onto an SVR can mean a sharp jump in monthly payments, even during a price war.
Is Now A Good Time To Get A Mortgage?
The best time to get a mortgage is as soon as you can afford one. The earlier you buy a house the longer you have to pay it off.
First-time buyers are expected to lead housing activity in 2026. Monthly mortgage costs, as a share of income, are at their lowest level since 2022, and more lenders are offering 95% loan-to-value mortgages.
Competition among lenders, combined with modest house price growth and easing affordability pressures, is reopening doors for buyers who have been waiting on the sidelines.
But expect mortgage providers to tighten lending criteria in 2026, so you should now is a good time to get a mortgage as rates fall, lenders often become more selective, meaning it may become harder to get a better deal in the future as you may need:
- Stronger credit scores
- More stable income history
- Lower risk profiles (demonstrating your past ability to pay back debt)
This makes early preparation crucial. Improving your credit profile and securing a mortgage in principle can give you a major edge.
Why Using a Mortgage Broker Can Help
During a price war, deals change quickly and eligibility rules can shift overnight. A whole-of-market mortgage broker can:
- Compare thousands of mortgages
- Factor in fees and criteria
- React quickly as rates move
This is especially valuable when lenders quietly launch or withdraw their most competitive offers.
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| Tembo Money Expert Review: Affordability & Help To Buy Your First Home Provider: Tembo Money Verdict: Tembo Money specialises in helping to buy your first home with expert mortgage advice combined with top paying Lifetime and Cash ISA. Is Tembo Money Any Good? Update: on 9 January, 2026, Tembo paused deposits and transfers in for its Fixed Rate Cash ISA due to technical issues, but was due to resume the following week. Tembo is a really slick app and service that can help those with affordability issues get on the property ladder sooner. As well as their online and personal mortgage brokerage service they also have to of the best savings accounts on the market. The Tembo Lifetime ISA comes with excellent rates and the Government 25% top up and for when you have used up your £4,000 LISA allowance there is also a great paying Cash ISA. When I spoke to Richard Dana the CEO and founder of Tembo for this review, he highlighted that the key benefit of Tembo’s serivce is that it is all in one place and they can manage the entire process of savings to buying your first home. The savings accounts don’t have any withdrawal penalties, there are no cheeky intro rates and as an added bonus Tembo offer free mortgage advice for all savings account holders, which is a saving of up to £749. Pros
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Overall4.7 | ||
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Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
Richard’s contributions and expertise have been recognized by respected publications such as The Sunday Times, BusinessInsider, Yahoo Finance, BusinessNews.org.uk, Master Investor, Wealth Briefing, iNews, and The FT, among many others.
Under Richard’s leadership, the Good Money Guide has evolved into a valuable destination for comprehensive information and expert guidance, specialising in trading, investment, and currency exchange. His commitment to delivering high-quality insights has solidified the Good Money Guide’s standing as a well-respected resource for both customers and industry colleagues.
To contact Richard, please see his Invesdaq profile.
