The Salary Calculator

The UK Mortgage Market: How to Navigate the Landscape in 2026

by Madaline Dunn

The new year brought with it big changes to mortgages, with expanded borrowing terms and rate cuts, continuing December’s price war.

Entering February, the tide has turned, with rates lifting again across a number of lenders.

This week at The Salary Calculator, we’ll explore what these changes mean for buyers, tips for navigating mortgage deals, and what’s ahead across the mortgage landscape.

Mortgage market changes

Last year, cuts to the UK base rate led to greater mortgage affordability, with lower borrowing costs across providers. 

This trend continued into 2026. 

According to Moneyfacts’ UK Mortgage Trends Treasury Report, in early January, the average two-year fixed mortgage rate was at 4.83%, down from 5.48% at the beginning of 2025, while the average five-year fixed rate was 4.91%, down from 5.25%.

But mortgage rates fell even lower. Lenders like NatWest, Barclays, Halifax and Nationwide all hit the headlines after significantly cutting their rates, some to as low as 3.5% for fixed-rate deals.

In January, the latter additionally announced it was extending its high loan‑to‑income (LTI) lending, enabling home movers and remortgaging customers to borrow up to six times their income.

And earlier in 2025, following updates to the Financial Conduct Authority’s (FCA) guidance, major lenders also relaxed their mortgage stress tests, which evaluate the impact of future interest rate rises on a borrower’s mortgage payments.

This month, on the mortgage front, the trend of low rates has shifted.

A number of lenders have increased their rates, including Nationwide and NatWest, ahead of the Bank of England’s (BoE) base rate decision — which was ultimately held at 3.75% — underscoring the market’s unpredictability.

Nationwide has announced it is increasing its rates by 0.19 percentage points, Barclays by up to 0.15 percentage points and Natwest by 0.10 percentage points.

Those who are now at the end of their low-cost five-year fixed terms will also be bracing themselves for a hike. 

Responding to the base rate decision, Ben Thompson, Director of Home Moving Strategy, Mortgage Advice Bureau, said the BoE had “opted for the safety of the sidelines.”

“Despite inflation moving in the right direction, the MPC clearly isn’t ready to hit the accelerator on further rate cuts yet. That said, we still hope for a couple more cuts this year before we get close to some sort of new equilibrium,” he added. 

What does this mean for buyers?

Thompson advised that, as lenders will have already priced in this latest hold, the deals on the shelves today are “likely as good as they’re going to get for a little while.” 

“Arguably, the smart move right now isn’t trying to wait out the market for a perfect moment that might not come: it’s about finding a deal that actually fits your life and your budget,” said Thompson.

“Mortgage affordability has been a frustrating hurdle for first-time buyers”

And, with research from Twenty7tec finding that more than half of first-time buyers in the UK earn less than a combined £60,000 and house prices up 74 per cent over the last 20 years, mortgage affordability is front of mind for many as they navigate these recent shifts.

But some forecasts suggest the mortgage landscape remains broadly positive, and the BoE also shared that the Bank Rate is “likely to be reduced further.”

“Mortgage affordability has been a frustrating hurdle for first-time buyers,” commented Rachel Springall, Finance Expert at Moneyfactscompare.co.uk. “Thankfully, falling mortgage rates and stress test relaxation over the past 12 months is giving buyers a better chance to secure a deal.”

Springall said that the relaxation in stress testing can help ease affordability constraints, and noted that more lending at higher Loan-to-Value (LTV) ratios was evident last year, adding that further growth is looking “promising” in 2026.

Rachel Geddes, Strategic Lender Relationship Director, Mortgage Advice Bureau, echoed this: “The Bank of England reducing rates in recent months is excellent news for homebuyer affordability.”

Geddes explained that lower monthly payments not only ease the pressure on finances but also provide the flexibility to reduce mortgage terms, keeping repayments at a “comfortable level” and enabling homebuyers to potentially pay off their home much sooner than originally planned.

Geddes called the combination of rate cuts and expanded borrowing criteria a “game-changer” for those who felt priced out of their ‘next step’ property.

However, against the backdrop of product choice being at its highest level in years, and lenders “actively wanting to lend,” speaking to an adviser is essential, Geddes said.

“They can cut through the noise to find the specific deal that aligns with your financial goals,” she noted. 

Springall shared a similar sentiment: “Seeking independent advice is wise to pick a mortgage which provides the best overall value, both with an attractive rate, incentives and low or zero application fees.”

What’s ahead in 2026?

Looking ahead, Springall said that innovation is set to become a “key talking point” this year, with expanding options for first-time buyers and modernising regulation to be reviewed by the Financial Conduct Authority.

Indeed, the FCA has set out its priorities for its mortgage market reforms, one of which is aimed at people with different working patterns and income levels at different stages of life. 

This reform aims to simplify mortgage rules to allow more flexible products for those with variable incomes, making it easier for more people to get on the housing ladder.

“…there does need to be more progress to address the lack of affordable housing”

According to Springall, building societies “lead the charge” in providing “innovative products” for new buyers, naming the Track Record Mortgage from Skipton Building Society, the Helping Hand offer from Nationwide and the Rent to Own mortgage from Hanley Building Society as examples.

She noted that the Government wants lenders “to do more” to support buyers to boost UK growth, but added that affordable housing is a key issue: “…there does need to be more progress to address the lack of affordable housing, as those with little equity are at risk if house prices plummet.”

For those questioning their next move in light of the recent changes, having all the facts is key, but Geddes advised that it’s important not to fall into the trap of “waiting for things to get better,” as market conditions can change. 

“There are no guarantees that rates will drop significantly further, so focus on what is achievable for you today,” said Geddes.

Tags: Mortgages