Lenders set to lower mortgage rates in early 2026

Bank of EnglandAdd to myFTGet instant alerts for this topicManage your delivery channels hereRemove from myFTLenders set to lower mortgage rates in early 2026Property experts say decision adds momentum to downward trajectory of lending costsEstate agents are divided on whether cheaper mortgages will energise the property market © Chris Ratcliffe/BloombergLenders set to lower mortgage rates in early 2026 on x (opens in a new window)Lenders set to lower mortgage rates in early 2026 on facebook (opens in a new window)Lenders set to lower mortgage rates in early 2026 on linkedin (opens in a new window)Lenders set to lower mortgage rates in early 2026 on whatsapp (opens in a new window) Save Lenders set to lower mortgage rates in early 2026 on x (opens in a new window)Lenders set to lower mortgage rates in early 2026 on facebook (opens in a new window)Lenders set to lower mortgage rates in early 2026 on linkedin (opens in a new window)Lenders set to lower mortgage rates in early 2026 on whatsapp (opens in a new window) Save James PickfordPublishedDecember 18 2025Jump to comments sectionPrint this pageUnlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The Bank of England’s latest cut to the base rate will lead to lower mortgage costs and a boost to the housing market at the start of next year’s buying season, experts said. The BoE trimmed its official interest rate from 4 per cent to 3.75 per cent on Thursday, the sixth cut since August 2024. The reduction had been widely expected as inflation has eased in recent months.Most mortgage borrowers hold fixed-rate deals, so will see no immediate benefit from the decision, but those on tracker and variable deals are likely to benefit from lower rates in the coming days. Nationwide, for instance, said borrowers on its standard mortgage rate would see a reduction of 0.25 percentage points from the start of January. For those looking to remortgage or soon to take out a fixed-rate loan, the cut will add momentum to recent rate reductions on two- and five-year deals. Mark Harris, chief executive of mortgage broker SPF Private Clients, said lenders were keen to attract more business with better deals as the market entered 2026.“With some lenders repricing on a weekly basis, it is now possible to access a short-term fix at just over 3.5 per cent,” he said. “Given how relatively quiet activity is with the usual pre-Christmas lull, we would expect to see rates dip below that level in late December or early January.” Five-year fixes could fall below 3.5 per cent slightly later in the new year, he added, down from current levels just over 3.7 per cent. The lowest-rate residential deals flagged by finance site Moneyfacts include a two-year fix from Santander at 3.51 per cent for home movers with a deposit of at least 40 per cent, or 3.72 for a five-year fix. For those with a deposit of only 10 per cent, Nationwide offers a two-year deal at 3.98 per cent or a five-year fix at 4.16 per cent.The possibility of further cuts by the BoE in coming months is likely to encourage a shift towards shorter-term two-year deals. Aaron Strutt, product director at Trinity Financial, said: “Many homeowners who have recently locked into three- or five-year fixes will probably be regretting their decision and thinking they should have taken a two-year fix or even a tracker as they suddenly look a much better bet.” Speculation about tax changes ahead of the November Budget quelled market activity, agents said, particularly among higher-value buyers worried about the introduction of a mansion tax. However, Nick Leeming, chair of estate agent Jackson-Stops, said the rate cut would help bring buyers back. “We expect to see a gradual increase in buyer enquiries, improved sentiment, and a more balanced market, with the potential to encourage discretionary movers and international buyers back into the market.”Others sounded a more cautious note, suggesting recent disappointing economic data was a harbinger of relative restraint in the property market for 2026. Lucian Cook, head of residential research at estate agent Savills, said: “It does feel as if this long-awaited rate cut is already ‘baked-in’ to fixed-term rates, and an underlying sense of caution among buyers will override any potential stimulus to house prices in the short term.”Savills expects house price growth to remain in the low single digits next year, regardless of improved affordability. “While interest rates are expected to continue to edge down, weak economic growth is likely to act as a drag on buyer confidence, with a weak labour market limiting the capacity for growth.”Reuse this content (opens in new window) CommentsJump to comments sectionPromoted Content Follow the topics in this article Property sector Add to myFT Residential property Add to myFT UK property Add to myFT Personal Finance Add to myFT Mortgages Add to myFT Comments