Mortgage rates could be cut in the coming weeks, analysts have forecast, as competition heats up amongst lenders at the start of 2026.
Financial information service Moneyfacts says in a new report that “expectations are high for a booming market” this year, sharing data that reveals the choice of mortgage products has risen to new highs.
First-time buyers are also finding support in looser requirements by lenders, with many more deals aimed at those with a low deposit available, the report finds.
It shows that product choice overall rose month-on-month, to 7,158 options, up 650 in a year, making the highest level since October 2007. Meanwhile, deals at 90 and 95 per cent loan-to-value brackets are sitting at near 18-year highs.
Mortgage rates began to fall last year, a trend that is predicted to continue into 2026. In August, the average two-year fixed mortgage rate went below 5 per cent for the first time since Liz Truss’ mini-budget in September 2022.
It now sits at 4.44 per cent, according to the data. And a December base rate cut, from 4 per cent to 3.75 per cent, offered an early Christmas gift to many mortgage holders on tracker rates.
Rachel Springall, finance expert at Moneyfacts, said: “Borrowers and lenders will be in a state of optimism, off the back of a positive 12 months for the mortgage market in 2025.
“Mortgage rates are lower year-on-year, and the choice of deals is abundant. The relaxation in stress testing and expectations for further rate cuts will help ease the affordability constraints on borrowers.”
However, she adds that “more progress to support underserved buyers would be welcomed amid a lack of affordable housing.”
In July, regulators gave lenders the ability to offer more mortgages at high loan-to-income (LTI) levels, which means first-time buyers are able to borrow more to get on the housing ladder.
The Financial Conduct Authority is also consulting on plans to make getting a mortgage easier for first-time buyers and the self-employed. The watchdog says it is looking at “simplifying mortgage rules,” with changes set to come into effect later in 2026.
Ms Springall said: “Innovation is set to become a key talking point this year, as expanding options for first-time buyers and modernising regulation are some of the key themes to be reviewed by the Financial Conduct Authority, laid out in its ‘Roadmap’ for the mortgage market”.
