Current Status: Mortgage rates in the UK have eased from their 2023–2024 peak following the Bank of England base rate reduction to 3.75% in December 2025. Lenders have begun to reprice fixed-rate products, though rates remain materially higher than the ultra-low levels seen earlier in the decade. Expectations for 2026 and 2027 are now focused on gradual normalisation rather than rapid cuts.

Another question dominating buyer searches right now is: Are mortgage rates expected to fall further in 2026?

The realistic answer is that further easing is possible, but dramatic drops are unlikely. Both 2026 and 2027 are shaping up as periods of adjustment rather than a return to ultra-cheap borrowing.

For buyers, this distinction matters. Mortgage decisions in the next two years should be based on stability and affordability, not on the expectation that rates will soon return to historic lows.

Why mortgage rates rose and why they are now easing

Mortgage rates rose sharply as inflation accelerated and central banks tightened policy. The goal was to reduce demand and stabilise prices across the economy.

As inflation pressures have moderated, the Bank of England has begun to ease policy. This has allowed lenders to reprice products downward, particularly for borrowers with stronger deposits.

However, the underlying environment has changed. Higher funding costs, regulatory capital requirements, and a more cautious lending stance mean mortgage rates are unlikely to return to the levels seen between 2016 and 2021.

What to expect from mortgage rates in 2026

In 2026, most forecasts point toward modest further easing rather than aggressive cuts. This suggests a gradual improvement in affordability, particularly for buyers with good credit profiles and lower loan-to-value ratios.

Importantly, even small changes in rates can have a meaningful impact on monthly repayments. That said, lenders are expected to remain conservative, and affordability tests are unlikely to loosen significantly.

For buyers, 2026 is likely to feel more predictable than the previous few years. Predictability, rather than the absolute level of rates, is what tends to support transaction confidence.

Looking ahead to 2027: stabilisation rather than a reset

By 2027, mortgage rates are expected to stabilise further, assuming inflation remains under control and economic conditions remain broadly steady. This does not imply a sharp drop, but rather a more settled rate environment.

In practical terms, 2027 may offer slightly lower headline rates than 2026, but the difference is unlikely to be transformational. Buyers waiting purely for cheaper mortgages may find that any rate benefit is offset by increased competition or firmer prices in stronger market segments.

This is why many analysts view 2026 and 2027 as part of the same cycle rather than distinct turning points.

What this means for buyers deciding when to act

Buyers deciding whether to act in 2026 or wait until 2027 should focus less on headline rate predictions and more on personal resilience.

• Affordability at current rates, not hypothetical future rates
• Ability to absorb short-term rate volatility
• Security of income over the medium term
• Negotiation leverage in a slower market

In many cases, securing a suitable property at a sensible price in 2026 may outweigh the marginal benefit of slightly lower rates in 2027.

How mortgage rates interact with London house prices

In London, mortgage rates do not act in isolation. They interact with affordability ceilings, buyer confidence, and supply constraints.

If rates ease further into 2026 and 2027, demand is likely to return first to the most liquid and affordable areas. This can reduce buyer leverage in those segments even if headline rates look more attractive.

As a result, buyers who wait solely for rate cuts may face a different trade-off rather than a clear advantage.

Key takeaway

Mortgage rates may fall a little further in 2026 and stabilise into 2027, but a return to ultra-low borrowing costs is unlikely.

For most buyers, the decision should be based on affordability, stability and value rather than trying to time incremental rate movements. In a calmer market, certainty often matters more than chasing the lowest possible rate.

For broader context, read: Why London house prices are falling and what the delivery system is signalling for 2026 | Should I buy a house in London in 2026?

image: constructionmagazine.uk

Expert Verification & Authorship: Mihai Chelmus Founder, London Construction Magazine