· 5 min read · Updated
Are UK mortgage rates going down in 2026?
They have fallen a long way from the 2023 peak, but the decline may be near its floor. With the base rate held at 3.75% in June 2026 and two MPC members voting to raise, the market is no longer pricing rapid further cuts. What that means for fixing, explained.
UK mortgage rates have come down a long way from their peak. The average two-year fixed mortgage rate exceeded 6 percent in mid-2023 and has fallen substantially through the Bank of England's cutting cycle. But with the base rate held at 3.75 percent in June 2026, and two Monetary Policy Committee members voting to raise rather than hold, the room for further falls is narrowing. The pace has been slower than many borrowers expected throughout, and the reason is worth understanding.
Why mortgage rates do not simply follow the base rate
A common misconception is that mortgage rates track the Bank of England base rate directly. They do not, except for tracker products. Fixed-rate mortgages, which account for the majority of new lending, are priced off swap rates: the rates at which banks exchange fixed and floating cash flows in the wholesale market. Swap rates reflect where markets expect the base rate to be over the fixed term of the mortgage, not where it is today.
When the Bank of England cuts the base rate by 0.25 percentage points, fixed mortgage rates do not automatically fall by the same amount. If the market had already priced in that cut, the swap rate will barely move. If the cut was unexpected, swap rates will fall and fixed-rate mortgage pricing will follow within days. The key variable is not the base rate itself but the gap between current rates and market expectations.
Where mortgage rates stand now
As of mid-2026, with the base rate at 3.75 percent, the best available two-year fixed rates for borrowers with a 40 percent deposit price close to the base rate itself. For borrowers with a 10 percent deposit, the equivalent is typically 0.5 to 0.8 percentage points higher. Five-year fixes are marginally lower than two-year fixes at most loan-to-value bands, reflecting where the market expects rates to settle over the medium term.
These figures are still considerably higher than the sub-2 percent rates available in 2020 and 2021. A borrower remortgaging from a five-year fix taken out in 2021 will face a materially higher monthly payment regardless of when they remortgage, because the reference rate has moved permanently upward from the near-zero baseline of the 2010s. The question for most borrowers is not whether rates are going down but how far, and whether to fix now or wait.
How much further will mortgage rates fall?
Probably not much, on the current evidence. The June 2026 MPC vote marked a shift: seven members voted to hold the base rate at 3.75 percent and two voted to raise it, with the Bank expecting inflation to pick up again later this year as higher energy prices feed through. Swap markets, which drive fixed-rate mortgage pricing, have moved from pricing a continued cutting cycle to pricing a rate at or near its floor. If that view holds, fixed mortgage rates settle around current levels rather than resume falling.
The risks run in both directions. If inflation rises further than the Bank expects, swap rates will reprice upwards and mortgage rates will edge higher. If the economy weakens and the Bank resumes cutting, mortgage rates could fall further than the current market path implies. But the base case has shifted from gradual decline to a plateau, and borrowers waiting for a return to the rates of 2020 and 2021 are likely to be waiting indefinitely.
Tracker versus fixed: which makes more sense now?
Tracker mortgages follow the base rate directly, typically at a set margin above it, which leaves them priced close to or above the best fixed rates. The argument for a tracker is that each base rate cut passes through to your monthly payment immediately, without needing to remortgage. That argument has weakened: with the MPC holding at 3.75 percent in June and two members voting to raise, there may be few cuts left to track, and a tracker carries the risk in the other direction too.
For borrowers who still expect rates to fall and want to benefit from each cut in real time, a tracker keeps that option open. For those who want certainty, a two-year fix at current levels locks in a meaningful improvement from the 2023 peak, whilst leaving the option to remortgage again into whatever environment 2028 brings.
What this means for the housing market
Falling mortgage rates are a partial offset to the affordability pressure that built up during 2022 and 2023. But house prices have not fallen sufficiently to restore pre-2022 affordability levels, particularly for first-time buyers. The combination of elevated prices and mortgage rates well above their 2019 to 2021 baseline keeps monthly repayments significantly higher than they were, even for the same property. Affordability has improved, but from a historically stretched starting point.
The falling rate environment is more directly beneficial for existing homeowners remortgaging than for new buyers. For current owners, each reduction in the fixed rate at remortgage represents a genuine improvement in monthly cash flow. For the full context on the Bank of England rate cutting cycle and what is driving it, see our note on UK interest rates.
CPIx, Briefed's composite consumer pressure index, tracks mortgage cost pass-through as part of the household financial conditions picture. As the cuts made since August 2024 feed through to remortgage rates across the stock of outstanding mortgages, the pressure on household cash flow eases gradually. The Briefed daily briefing covers each Bank of England decision and its immediate market implications, weekdays at 6:45am. Free to read.