Will mortgage rates fall this year?
Hopes of lower mortgage rates in the coming weeks and months are looking less and less likely due to the conflict in the Middle East. Whether you're buying a home, remortgaging or you’re a buy-to-let landlord, we look at the outlook for 2026.
Sam Walker
Home buyers will be hoping for a fall in mortgage rates in 2026, but with the ongoing tensions in the Middle East causing major disruption, what comes next?
Borrowers had benefited from falling rates at the start of the year as interest rates steadily fell, but pricing has started to rise again and may remain high for some time.
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“Even though the most competitive deals will remain below average, anyone looking to buy or remortgage this year needs to prepare for higher costs than previously expected.”
The situation is fast moving, so what could happen is open to change quickly, but here’s what may be in store for the rest of 2026 under the current climate.
Which mortgage lenders are increasing 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 March and swap rates, which help determine the cost of fixed-rate mortgages, have been on the way back up since the outbreak of the conflict in Iran.
That means mortgage rates are more likely to be going up than down at the moment.
As of 24 March, Coventry for Intermediaries had pulled all new customer residential and buy-to-let deals and was yet to relaunch them, while Aldemore, Metro, Gen H, TSB, Nottingham Building Society and Principality were among some of the other lenders raising rates, withdrawing products or repricing parts of their ranges.
Nationwide Building Society has said it will increase selected mortgage fixed and tracker rates by up to 0.3%, while Halifax is also implementing rate increases on all fixed rate products across its purchase, remortgage, product transfer and further advance ranges.
Nick Mendes, mortgage technical manager at broker John Charcol, said “further upward pressure” on fixed-rate mortgages as well as more lenders pulling deals was likely if markets keep pricing in interest rate rises.
The average two-year fixed residential mortgage rate was 5.43% as of 23 March, up from 4.83% on 2 March. This is the highest level since February 2025.
Meanwhile, the average five-year fixed rate was 5.45% as of 23 March, up from 4.95% on 2 March – its highest point since July 2024.
The lowest mortgage rate currently on the market is 4.21% from first direct but borrowers would need a 40% deposit.
Despite mortgage rates being 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 months, in a boost for first-time buyers struggling to get a deposit together.
Lloyds Bank has launched its “Lend a Hand” mortgage offering 100% LTV, although a family member will need to put 10% of the loan into a savings account for three years as security.
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.
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.
We reveal how to get the best deal when remortgaging.
What are swap rates?
Swap rates have had plenty of press since the start of the Iran conflict – but what are they, and why are they important for mortgage rates?
Swap rates are agreed between financial institutions, like a lender and an insurance company, and refer to the rate of interest one agrees to pay the other in return for funds over a set period of time.
Ultimately, they reflect the wholesale cost of funding for banks that influences how they price credit such as loans and mortgages.
This means that if swap rates go higher, it’s more expensive for the lender to borrow and it will have to hike rates on its mortgage products.
Swap rates are based on what markets believe will happen to interest rates and inflation in the future.
With the ongoing conflict in Iran stoking fears that inflation could spike globally, leading to higher interest rates, this has seen swap rates rise.
In turn, lenders have been pushing up their mortgage rates as it becomes more expensive for them to borrow money.
What is the forecast for mortgage rates?
At the start of the year, the BoE had been expected to cut interest rates twice in 2026, including a cut at the MPC’s March meeting. However, this was before US-Israeli attacks on Iran on 28 February.
The MPC held rates at the March meeting, with the potential inflationary impact of the conflict in the Middle East causing some experts to believe they could be paused for a prolonged period.
Advisory firm Oxford Economics believes the MPC will now hold rates where they are until well into 2027.
As of March 23, some traders were expecting four interest rate rises across the rest of 2026.
In its March report, the BoE suggested the Consumer Price Index (CPI) measure of inflation, currently at 3%, is now “likely” to stay between 3% and 3.5% over the next two quarters. In February, it forecast the CPI measure to fall to its 2% target from April 2026
All of this suggests mortgage rates will remain higher than the start of 2026, and could rise further as the year goes on.
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.
However, if you are one of the estimated 1.8 million people on a fixed-rate mortgage that is expiring this year, according to UK Finance, you might be considering whether now is a good time to fix again.
Fixed rates can offer you certainty over what you’ll pay in interest over the course of the deal, even if rates are on the rise.
Andrew Montlake, chief executive officer of mortgage broker Coreco, said with mortgage rates forecast to rise, now could be a good time to lock in a new fixed-rate deal.
“In the unlikely event that the war does end in the not-too-distant future, there will potentially be an opportunity to switch onto a lower rate before your completion date,” Montlake added.
What about variable mortgage rates?
The average Standard Variable Rate (SVR) is 7.13% as of 24 March, according to Moneyfacts. The average two-year tracker is at 4.55%.
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.
You could also opt for a tracker mortgage which more directly follows the BoE base rate.
David Hollingworth, associate director at mortgage broker L&C Mortgages, 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 23 March, the average two-year buy-to-let mortgage rate was 5.05%, while the average five-year BTL rate was 5.43%, according to Moneyfacts.
These rates are 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 may be hoping for a further fall in mortgage rates later this year though 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 and coming into effect in April 2027.
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.
