UK Mortgage Market Review: Year to Date 2026

Where We Started the Year

2026 began with cautious optimism. Inflation had been falling, the Bank of England had cut the base rate to 3.75% in December 2025, and many forecasters were predicting a continued easing cycle through the year. UK Finance projected overall gross lending to rise by four per cent to £300 billion, with a ten per cent increase in external remortgaging and 1.8 million fixed-rate mortgages due to expire during the year. For many borrowers, 2026 was shaping up to be a genuine window of opportunity. UK Finance

That optimism has since been tested.

The Base Rate: Held, Not Cut

The current Bank of England base rate is 3.75%, following the Monetary Policy Committee's decision on 30 April 2026 to hold rates. The MPC next meets on 18 June 2026.

At the April meeting, the Committee voted 8–1 to maintain the rate, with one member voting to increase it to 4%. The MPC cited the Middle East conflict and its impact on global energy prices as a key source of uncertainty. Bank of England

CPI inflation currently stands at 3.3% for the 12 months to March 2026 — well above the Bank's 2% target — and the MPC has warned it is likely to rise further as higher energy prices pass through to household bills. MoneySavingExpert.com

For borrowers who entered 2026 expecting several base rate cuts, this is a significant recalibration. The Bank is not in a position to cut while inflation is this far above target, but it is equally reluctant to raise rates into a fragile economy. It is, in short, sitting on its hands — and the mortgage market is feeling the consequences.

Fixed Rates: A Sharp Repricing

CURRENT POSITION:

The 30-day swap moves have remained unchanged, with both 2-year and 5-year SONIA swaps showing a 0bps movement. This stability follows a period where market interest rates had risen due to the Middle East conflict, which the Bank of England noted gave them more time to assess economic effects. The recent 7-day trend also shows no movement, reinforcing the current stable, albeit elevated, swap levels. This suggests the market is currently digesting recent data without strong conviction for immediate directional changes in borrowing costs.

EXPECTED RATES:

The Bank of England average 2-year fixed mortgage rates are expected to sit between 4.53% and 4.70% within the next 30 days. For 5-year fixed mortgage rates, the expected range is 4.47% to 4.53%. Markets are currently expecting a hold at the next MPC meeting on 19 Jun 2026, with money markets pricing in a 70% chance of a rate hike, down from 80% late last week. The swap data supports a hold, but the broader market consensus remains firmly in favour of a hold. Predicted MPC vote: 8-1-0 (hold-cut-rise).

RATE OUTLOOK:

Compared to the last BoE average mortgage rates published on 31 March 2026 (2-year fixed: 3.98%, 5-year fixed: 4.06%), in 2 years time, the average 2-year fixed mortgage rate is expected to be significantly higher at around 4.50%, with the average 5-year fixed significantly higher at around 4.45%. In 5 years time, the average 2-year fixed is expected to then fall slightly to around 4.47%, and the average 5-year fixed to fall slightly to around 4.43%. The BoE base rate may be around 4.25% in 2 years and 3.75% in 5 years, based on the swap curve and gilt yields pricing in a gradual easing of monetary policy over the longer term.

Approvals and Activity

Mortgage approvals for house purchases in March 2026 stood at 63,531 — down one per cent on a year ago but up one per cent on February. That modest improvement follows a soft start to the year: approvals fell to 59,999 in January 2026, the lowest level since January 2024, before recovering to 62,600 in February. House of Commons Librarytradingeconomics

The remortgage market has held up better. Approvals for remortgaging rose to 41,200 in February 2026, up from 38,500 in January. This is consistent with the large cohort of fixed-rate deals expiring this year, as borrowers who locked in at historically low rates during 2021 and 2022 come to the end of their terms and are forced to refinance at current rates. tradingeconomics

House Prices: Broadly Flat, but Regionally Varied

UK house prices were broadly unchanged between March 2025 and March 2026. On a seasonally adjusted basis, average prices decreased by 0.2% between February and March 2026. Prices grew fastest in Northern Ireland, Wales, and Scotland, while falling fastest in London, the North East, and the North West. House of Commons Library

For clients in the East of England, including Cambridgeshire and the surrounding area, the picture has been broadly stable. The anticipated spring bounce has been muted, partly by higher mortgage rates and partly by wider economic uncertainty.

What Is Happening to Rates Right Now (May 2026)

After the sharp repricing seen in April — when swap rates spiked on the back of Middle East energy concerns — the picture in May has shifted, cautiously, in a more positive direction. Several major lenders have been cutting mortgage rates this month, reversing some of the earlier hikes driven by rising swap rates and inflation risk. As of 26 May, two-year fixed rates for a purchase start from around 4.40%, with five-year fixes available at comparable or lower levels depending on loan-to-value. For first-time buyers, fixed rates currently start from around 4.40%, though the rate available to you will depend on your deposit size, loan-to-value, and personal circumstances. However, the optimism should be tempered: experts are warning that swap rates have been creeping back up, and there is a real risk that the recent cuts slow or reverse in the coming weeks. The MPC has signalled that higher inflation is on the way and that a rate rise remains on the table for later in 2026. The next base rate decision is 18 June. In short, rates are moving in the right direction today, but the window may not stay open for long.

What This Means for You

If your fixed rate is ending in the next six months: Do not wait. Lenders typically allow you to lock in a rate up to six months ahead of your deal ending, with the ability to switch to a better rate if one becomes available before completion. Given the volatility we have seen this year, early action is sensible.

If you are buying: Affordability has tightened again following April's rate increases. Getting a decision in principle and understanding your maximum borrowing at current rates is an essential first step before committing to a purchase.

If you remortgaged or bought during 2020–2022: You are likely approaching renewal on rates that were artificially low by any historical measure. The adjustment will feel significant. Planning ahead, exploring all lender options, and considering the right fix length for your circumstances are all conversations worth having now.

On protection: With monthly outgoings rising, the question of what happens if you cannot work due to illness becomes more pressing. If you do not have income protection or life cover in place, this is a good time to review that alongside your mortgage.

Looking Ahead

The next MPC meeting on 18 June is not expected to bring a rate increase, as the Bank continues to balance above-target inflation against weak growth and rising energy uncertainty. However, some economists have not ruled out a rate rise later in 2026 if energy costs remain elevated. The outlook for 2027 is currently uncertain, and locking in a competitive rate now while keeping it under review is likely to be the safest strategy for most borrowers.

The overriding message from the first five months of 2026 is that the mortgage market rewards preparation and penalises hesitation. If you would like to discuss your circumstances, whether you are buying, remortgaging, or simply reviewing what you have, we are here to help.

Your home may be repossessed if you do not keep up repayments on your mortgage.