Britain’s mortgage market is gearing up for a revival, with fierce competition among lenders pushing rates lower, opening the door to easier borrowing and raising hopes of a housing rebound in the year ahead.
The UK mortgage market could be on the brink of a boom as lenders compete aggressively for customers, driving down rates and relaxing lending rules, according to brokers and analysts.
A new report from financial data firm Moneyfacts says expectations are building for a strong mortgage market in 2026. The number of available mortgage deals has climbed to its highest level in 18 years, giving buyers more choice than they have seen in nearly two decades.
Mortgage rates have already fallen over the past year, and Moneyfacts believes further cuts are likely in the coming weeks. While global economic uncertainty still poses risks, analysts say the overall direction of travel is positive.
Most borrowers – more than eight in 10 – are on fixed-rate mortgages, meaning their interest rate stays the same for two or five years. When those deals expire, many households face higher payments than before, though the pressure has eased compared with last year.
In August, the average two-year fixed mortgage rate dropped below 5% for the first time since the market turmoil following the September 2022 mini-budget. Rates have since edged lower, with lenders making small but steady reductions.
Moneyfacts says first-time buyers are also starting to benefit. Rising wages mean mortgage costs now take up a smaller share of income than they did a few years ago, even though house prices remain high and suitable homes are in short supply.
Recent regulatory changes have allowed lenders to be more flexible on affordability. As a result, new products have emerged, including mortgages that allow borrowing of up to six times income where finances permit. Some lenders are even offering low-deposit or no-deposit deals, while family support schemes such as joint borrower, sole proprietor mortgages are becoming more common.
There are signs of pent-up demand, with many would-be buyers delaying decisions until after the Budget and the Christmas period. However, forecasts remain mixed, and some industry experts still expect overall sales to dip compared with 2025.
Competition is expected to intensify further as around 1.8 million borrowers come to the end of fixed-rate deals this year, prompting lenders to fight harder for new business through cheaper rates and looser criteria.
House prices, meanwhile, have remained relatively stable. Experts say the market has cooled from the post-pandemic frenzy, becoming more balanced and predictable.
While interest rates are easing and choice is improving, a key tension remains: sellers often still price homes as if it were 2022, while buyers are hoping for values closer to 2014.
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