UK set for a booming mortgage market, say analysts

Competition among lenders suggests that mortgage rates could be cut in the coming weeks, according to brokers and analysts.

In a newly-published report, financial information service Moneyfacts said “expectations are high for a booming market in 2026”.

Its data shows the choice of mortgage products has risen to its highest level in 18 years, with first-time buyers now also being helped by looser requirements from lenders.

Mortgage rates fell over the last year, but wider global and economic uncertainty still has the potential to derail any further improvements. Some borrowers also still face a financial hit when their current deal comes to an end.

More than eight in 10 mortgage customers have fixed-rate deals.

The interest rate on this kind of mortgage does not change until the deal expires, usually after two or five years, and a new one is chosen to replace it.

In August last year, the average two-year fixed mortgage rate dipped below 5% for the first time since former Prime Minister Liz Truss’s mini-budget in September 2022.

Rates have fallen further, with some movement in recent days, and Moneyfacts has predicted more declines early this year.

“Expectations are high for a booming market in 2026. Mortgage rates are lower year-on-year, and the choice of deals is abundant,” said Rachel Springall, finance expert at Moneyfacts.

“First-time buyers are not being left behind by this progress.”

Buying a property is a huge financial stretch for many first-time buyers, and the number of suitable homes on the market is limited.

But rising wages also mean that mortgage costs as a share of income are at their lowest for a few years for first-time buyers.

Regulators have recently allowed lenders to be more flexible with mortgage affordability so Jo Jingree, director of broker Mortgage Confidence, said more innovative products to help people buy a first home were now available.

“These include allowing borrowing up to six times your income, where affordability allows,” she said.

Some lenders were offering low, or no, deposit mortgages, she added. Family and friends were able to support borrowers through new, so-called joint borrower, sole proprietor mortgages.

In general, mortgage brokers have suggested there is some pent-up demand among potential buyers who were waiting for the Budget and the festive period to be over before making firm plans to move.

However, such a judgement is difficult to make with any certainty. Industry predictions made before Christmas suggested sales could fall over the year as a whole compared with 2025.

Aaron Strutt, from broker Trinity Financial, said 1.8 million borrowers were coming to the end of their fixed rates and competition between the lenders to issue more mortgages was likely to be even stronger this year.

“We can expect to see some more criteria easing and hopefully even cheaper fixed rates,” he said.

Housing commentators have pointed to the relative stability of prices in recent times.

Buying agent Henry Pryor said the UK housing market had moved on from the “red-hot” period for sellers in the aftermath of Covid.

“There are distinct differences as always as you move to higher prices and from parish to parish but in general the UK housing market remains healthy and largely predictable,” he said.

“Interest rates seem to be coming down, [housing] supply remains constrained but people have choice and are more cautious. The biggest problem remains price – sellers think that it’s 2022 while buyers think it’s 2014.”