Expectations are high for a booming mortgage market
Moneyfacts UK Mortgage Trends Treasury Report data reveals the falls in mortgage rates during 2025, along with product choice growth, sets a positive stage for the market in 2026.
Product choice overall rose month-on-month, to 7,158 options, where year-on-year, there are now 650 more deals available to borrowers. The latest count is the highest since October 2007 (7,421). Deals at 90% and 95% LTV brackets sit at near 18-year highs.
Mortgage activity resulted in a rise in the average shelf-life of a mortgage to 21 days.
Fixed mortgage rates remain below 5% to start 2026. The average two-year fixed mortgage rate continued its downward trend, now 4.83% to start January 2026, down by 0.03% month-on-month, a marginal drop versus the 0.08% recorded at the start of December 2025. The average five-year fixed rate remained unchanged at 4.91%.
The Moneyfacts Average Mortgage Rate fell to 4.87% month-on-month from 4.91%. Year-on-year the rate is down by 0.53%, from 5.40% in January 2025.
The average two-year tracker variable mortgage rate fell to 4.44% from 4.66% month-on-month and is down by 1.03% year-on-year from 5.47%. Cuts to the Bank of England Base Rate have helped fuel the fall.
Remortgage customers will find the incentive to switch has intensified, as fixed rates are substantially lower than the average ‘revert to’ rate or Standard Variable Rate (SVR). The average SVR fell to 7.25% month-on-month, now down by 0.56% year-on-year from 7.81%. The highest recorded was 8.19% during November and December 2023.
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. Expectations are high for a booming market in 2026. 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. First-time buyers are not being left behind by this progress, as deals aimed at those with a low deposit now stand at their highest levels for almost 18 years, yet more progress to support underserved buyers would be welcomed amid a lack of affordable housing. 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.
“The start to a New Year is typically a slow burner for mortgage re-pricing, but lower swap rates should incentivise lenders to pass on rate cuts in the coming weeks. As we have seen over the past few months, fixed rate cuts have been in abundance, fuelling healthy drops to the average two-year fixed mortgage rate, and many lenders appeared to pass on cuts by the Bank of England ahead of reductions to the base rate. Amid hopes of more cuts to come among borrowers, the appetite for a shorter-term fixed deal could outweigh the appeal of longer-term fixed mortgages.
“Remortgage customers stand to make substantial savings when moving off a revert rate if they switch to a two-year fixed deal. Moving off the average revert rate of 7.25% to the average two-year fixed rate at 60% LTV of 4.28%, remortgage customers could save over £5,000 in repayments over one year, based on a mortgage of £250,000 over 25 years. As it stands, there is a rate difference of 0.28% on the average two-year fixed deal at 60% LTV versus the five-year fixed equivalent, so a shorter term may seem more appealing for those coming off a low fixed rate. UK Finance expects a 10% rise in external remortgaging in 2026, and 1.8 million fixed rate mortgages are due to come to an end this year. However, some of these will include buyers who managed to lock into a cheap rate in 2020, so they will need to seek advice for support if they are concerned about rising repayments by moving onto a higher fixed rate.”
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