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Homeowners could be on the brink of a long-awaited mortgage relief as lenders gear up for a price war that could see headline rates dip below 3% as early as spring next year.
Brokers say falling inflation and growing competition between banks mean 2026 “has a mortgage comeback written all over it”, with sub-3.5% deals expected imminently and some predicting even cheaper rates for the safest borrowers.
It comes after inflation fell more sharply than expected to 3.2%, fuelling expectations of further interest rate cuts and intensifying pressure on lenders to slash borrowing costs.
Ranald Mitchell, Director at Norwich-based Charwin Mortgages, said: “2026 has a mortgage comeback written all over it. We could genuinely see sub-3% headline deals for prime, low loan-to-value borrowers as lenders go to war for the best business.
“But the bigger story is criteria. Smarter affordability, better recognition of real-world incomes and more pragmatic credit policy could bring thousands back into the market who have been locked out in recent years.”
Others believe the days of ultra-cheap money are not returning, but agree rates are heading lower. Samuel Mather-Holgate, Managing Director and IFA at Swindon-based Mather and Murray Financial, told Newspage: “Are we seeing the return of the last decade with super low interest rates? Not really, but they are still declining and set for another 1% fall over 2026.
“Eventually they might settle at about 2.5% which is still significantly lower than the pre-financial crisis benchmark.”
However, some brokers warn banks will not rush to repeat the mistakes of the past. Ben Perks, Managing Director at Orchard Financial Advisers, said: “Rates may well dip into the twos, especially for low loan-to-value, ‘safer’ lending. But I think banks will be reluctant to go too low.
“We’ve seen borrowers struggle to maintain payments when they’ve come off ultra-low rates so lower rates will be welcomed.
“I think lenders and the regulator will move more towards stability, as the last thing anyone wants to see is a borrower getting hammered by overnight rate increases when their fixed rate product ends.”
There are around 1.9 million mortgages maturing in 2026, meaning millions of households will soon be shopping around for new deals.
Bob Singh, Founder at Chess Mortgages, said: “In the absence of a financial calamity, interest rates in 2026 will bring a much needed cheer to those on tracker mortgages and people coming off their fixed rates.
“With 1.9 million mortgages maturing in 2026, that’s a lot of financial decisions that have to be made. The base rate could fall to 3% or slightly lower by the end of next year, but not below 2.5%.”
But not everyone is convinced mortgage rates will fall as far as some hope. Justin Moy, Managing Director at EHF Mortgages, said: “I doubt rates will fall that low in 2026 for the majority of borrowers. There is already the odd buy-to-let deal or retention product below 3%, but with a nose-bleed of a product fee, it makes it difficult to stomach at the moment.
“We will need a near-car-crash of an economy to warrant mortgage rates going sub-3%. I think the base rate will find its happy place in the 3.25%-3.5% range, and mortgage rates will equally settle down just above that 3% figure.”
Mortgage rates have already been edging down, with some major lenders offering deals just above 3.5% for borrowers with large deposits or high equity.
The average two-year fixed mortgage rate stands at 4.82%, while the average five-year fix is 4.9%, according to Moneyfacts – though headline deals are now far cheaper for those with the strongest finances.
Experts say competition between lenders is likely to intensify in the New Year as banks chase limited growth by cutting prices, potentially ushering in the best borrowing conditions seen since rates began rising.
