Now nearly halfway through the first month of 2026, attention is turning to what the year ahead could hold for the UK mortgage market. After several years of volatility, there are growing signs that conditions may be more supportive than at any point since the peaks of turbulence following the end of the ultra-low rate era.

The past few years forced borrowers to adjust rapidly. Mortgage rates moved from historic lows to the five per cent range in a relatively short period, placing significant pressure on household finances. For some, this reset budgets entirely and delayed major financial decisions.

However, 2025 marked the beginning of a gradual recalibration. The year opened with the Bank of England base rate at 4.75 per cent and closed at 3.75 per cent following a December cut — the lowest level since early 2023. While further reductions remain possible in 2026, the most aggressive phase of the easing cycle may already be behind us. Markets increasingly appear to be pricing in a base-rate floor around 3.5 per cent.

This shift is helping to reshape borrower expectations. Rather than waiting for dramatic rate falls, many households may now focus on certainty, sustainability and longer-term planning.

Fixed rates find their footing

Swap rates – a key determinant for fixed-rate mortgage pricing – have continued to trend lower, with two-year swaps falling to around 3.40 per cent as of 12 January 2026, their most recent low. This has placed downward pressure on fixed-rate mortgage pricing, although the pace of reductions has steadied. Much of the anticipated easing now appears to be reflected in current fixed-rate products.

Fixed rates remain competitive and attractive for borrowers who prioritise predictability. With variable rates still sitting higher and inflation risks yet to fully disappear, the appeal of a fixed rate certainty remains strong. CPI inflation fell to 3.2 per cent in November, and the Bank of England expects it to move back towards its two per cent target more quickly in the near term. However, external risks could disrupt this downward trajectory.

Boost in product choices

Total mortgage product availability has risen to 7,158 deals, up by 650 year-on-year and the highest level since October 2007, according to Moneyfacts. Increased choice across a range of loan-to-value tiers may improve access for borrowers who were previously constrained, particularly those with smaller deposits or approaching refinancing decisions.

Refinancing remains a key driver

Refinancing activity is expected to play a central role in market dynamics this year. Around 1.8 million fixed-rate mortgages are due to expire in 2026 forcing borrowers to refinance to avoid their lender’s standard variable rates, an increase from 1.6 million in 2025. UK Finance expects this to drive a 10 per cent increase in external remortgaging activity to £77 billion, which involves only those switching to a different lender.

For some borrowers approaching the end of fixed deals, current rates may come as a relief compared to the much higher pricing seen in the aftermath of the mini-Budget. However, many will be coming off ultra low fixed rates secured during the pandemic. Seeking advice early is key, as this will help borrowers keep their options open.

Buy-to-let faces headwinds

New buy-to-let lending rose by 11 per cent in 2025 to £11 billion, but growth is forecast to stall in 2026 according to UK Finance. Additional regulation, higher taxes, and tighter affordability assessments continue to weigh heavily on the sector.

The Budget has further reduced personally owned landlord profitability. A two per cent increase in tax on property income from April 2027 will intensify existing pressures. This, coupled with the implementation of the rental reform bill from May 2026. As a result, rental supply may be further constrained, potentially limiting options for tenants and increasing rents.

Looking ahead

While turbulence and uncertainty from external factors cannot be ruled out, the mortgage market enters 2026 on firmer footing than it has seen for several years. Lower interest rates, expanding product choice, and more stable inflation suggest the market could be moving into a more balanced phase.

Average UK house prices increased by 1.7%, to £270,000, in the 12 months to October 2025, according to the Office for National Statistics. Rightmove forecasts an activity rebound in the housing market as improved affordability, greater choice, rising wages, and a gradual relaxation of lending criteria begin to support demand.

For borrowers, your strategy matters. Locking in a fixed rate could provide valuable certainty. Importantly, most lenders allow borrowers to secure a fixed rate up to six months before their existing deal ends, often with the flexibility to switch if more competitive options emerge before completion.

In an environment defined less by extremes and more by balance, the ability to lock in certainty while retaining flexibility could prove one of the most important advantages for borrowers navigating the mortgage market in 2026.

To learn more about your mortgage options, you can reach our team on 0800 652 0971 or email info@privatefinance.co.uk.

This article is based on information available on the date of issue, 13th January 2026.

Disclaimer: The views and opinions expressed in this content are those of the author and do not constitute financial, legal, or professional advice, nor should they be interpreted as a recommendation. They do not necessarily reflect the official views, policies, or positions of Private Finance, and are not intended to represent broader market or industry perspectives.

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