The best deals now start from 3.55% for a standard two year fixed rate mortgage, with the market average sitting at around 4.9%, down more than a full percentage point over the past year as lenders compete aggressively for business in an improving rate environment.

The fall in mortgage rates over the past 18 months has been driven by the Bank of England cutting its base rate from 5.25% - a 16-year high - down to 3.75% over the course of 2024 and 2025, as inflation has steadily retreated from its peak of 11.1% in October 2022. The number of mortgage products available has surged in response, with Moneyfacts reporting the highest level of mortgage choice in 18 years.

But what's the mortgage environment really like in early 2026 for home owners?

In late 2025, lenders entered a full-blown price war, with some deals hitting their lowest levels since 2022. However, the mood shifted slightly in early 2026 after Office for National Statistics figures showed inflation ticked back up to 3.4% in December - higher than expected - prompting some lenders to pull their cheapest deals and nudge rates back up.

The Bank of England voted to hold the base rate at 3.75% at its February meeting, though the decision was closer than many anticipated, with four of the nine members of the Monetary Policy Committee voting for a further cut to 3.5%. Markets are currently pricing in a 65% chance of a cut at the next meeting in March. As a result of this, mortgage rates are somewhat stable right now (because the fixed rates are likely pricing in the anticipated rate cut).

Brief, recent history

Back in December 2021, the average two year fixed rate mortgage was around 2.34%, when interest rates sat at just 0.25%. Rates then rose sharply through 2022 and 2023, peaking above 6% for many borrowers, before the gradual easing over the past 18 months as inflation rates have dropped.

How this history impacts mortgage holders

Mortgages are usually sold with two or five year fixed rates, meaning the benefit of falling rates will not be felt by everyone at once. Those on tracker mortgages have already seen their payments fall in line with base rate cuts, while those on standard variable rates should also have seen some relief. Fixed rate borrowers will only benefit when their current deal expires and they remortgage - though those coming off deals fixed before 2022 could still face a significant jump in costs (because they likely had a pretty low rate, relative to the market today).

Current trends

The latest data available in early 2026 reflects Q3 2025, and shows a few interesting trends.

First, 93% of new mortgage lending was for fixed rates (vs. 7% for variable rates). For comparison, in Q1 2023 the proportion of fixed rates for new mortgages stood at 83%. So, at the end of 2025, consumers had a strong preference for fixed rates.

Second, while a few years ago the proportion of mortgages that fell in the >= 90% "loan-to-value" (LTV) bucket fell below 4% of mortgages, in Q3 2025 over 7% of mortgages are in the >= 90% category. So, at the end of 2025, a higher proportion of consumers was taking up mortgages with a smaller down payment.

Rachel Springall at Moneyfacts said the number of 95% "loan-to-value" (LTV) deals now on sale is the highest since March 2008. She added:

"This year is setting itself up to be a fruitful one for first-time buyers, and really, they need all the help they can get amid the lack of affordable housing."