Mortgage rates have continued to fall in early 2026, with the rate on the typical deal currently standing at 4.86%, down from 4.90% a month ago, Moneyfacts data shows.
HSBC kicked off the new year with mortgage cuts for both private customers and landlords.
Being the first of the major lenders to cut rates in 2026 has led to predictions that more will follow in their footsteps in the coming weeks, which could be good news for borrowers.
This comes after the Bank of England cut the base rate from 4% to 3.75% just before Christmas, which the markets predict will fall to 3.25% to 3.5% this year.
For those looking to take out a two-year fixed rate contract, the average rate is currently 4.81% according to Moneyfacts. Those opting for a five-year solution will find a rate of 4.89% typical.
But with mortgage brokers predicting a price war between lenders following HSBC’s early move, could borrowers see even lower interest rates as the week progresses?
David Stirling, Independent Financial Advisor at Belfast-based Mint Wealth Ltdin conversation with the Newspage agency thinks so.
He said: “HSBC is out of the woods in early 2026 with deep discounts on all their residential products.
“This is certainly good news for borrowers, as many of the other major lenders will feel the need to make cuts as well to remain competitive, which could result in a rate war. With any luck, we could see deals below 3.5% before spring.”
House price growth
Analysis of mortgage rates and borrower activity also suggests that lower prices could lead to modest home price growth in 2026.
Adam French, head of news at Moneyfactscompare.co.uk, said that after three years of higher borrowing costs, the mortgage landscape could be “more forgiving in 2026 than at any time since 2021”, when interest rates were at their lowest level.
“Our modeling suggests that an easing of interest rates could allow modest home price growth without further stretching affordability,” he said, “an important shift from the intense affordability crunch from 2022 to 2025.”
Advice for borrowers in 2026
If you are borrowing to buy, refinance or move your first home in 2026, it is best to speak to a real estate agent.
Rates are falling, but it’s worth speaking to a professional to tailor advice to your needs and help you balance any price drops (or increases) to your advantage.
Nick Mendes, mortgage technical manager at mortgage broker John Charcol, said 2026 will be a year of adjustment for many households, with around 1.8 million households needing to refinance.
“Those coming out of a 2024 two-year fix should see some improvement,” he said, “while borrowers who took out a five-year deal they agreed to when rates were near historic lows will still face higher repayments even after recent cuts.
“Competition between lenders remains fierce, which should limit how far rates can rise, but the scope for sharp further falls appears limited unless markets become convinced that bank rates will move closer to 3%.”
Mendes also thinks there are early signs of stabilization in the housing market.
“Real house prices fell in 2025,” he continued, “but the easing of mortgage rates, softer affordability stress tests and continued improvements in criteria – especially for first-time buyers – point to modest growth in 2026, with significant regional disparities and apartments lagging behind houses.”