Competition between lenders is raising expectations that mortgage rates could fall further in the coming weeks, according to brokers and analysts. A newly published report from financial information service Moneyfacts suggests that the market is well-positioned for renewed momentum next year, with confidence building across both lenders and borrowers.
Moneyfacts said expectations are high for a strong mortgage market in 2026. Its latest data shows the number of mortgage products available has reached its highest level in 18 years, giving buyers more choice and flexibility. First-time buyers are also benefiting from looser lending criteria, with some lenders reducing deposit requirements or easing affordability tests.
Mortgage rates have already fallen over the past year, offering some relief after a prolonged period of higher borrowing costs. In August last year, the average two-year fixed rate dropped below 5% for the first time since the market turmoil following the September 2022 mini-budget. Rates have continued to edge down since, with further movement seen in recent days.
However, uncertainty remains. Global economic pressures and domestic fiscal risks could still disrupt further improvements. Some borrowers also face a sharp increase in costs when their current fixed-rate deal ends. More than eight in 10 mortgage holders are on fixed-rate products, meaning their payments remain unchanged until the agreement expires, typically after two or five years.
For first-time buyers, affordability pressures persist due to limited housing supply. That said, rising wages mean mortgage repayments now take up a smaller share of income than they have for several years. Brokers report signs of pent-up demand, with buyers waiting until after the Budget and festive period before committing. Even so, forecasts remain mixed, with some analysts expecting overall sales to dip compared with 2025, despite relatively stable house prices.
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