Will mortgage rates drop in 2026? Tembo's expert mortgage rate predictions for 2026

Tembo's 2026 housing market predictions at a glance:

• Inflation rises to 3.3%, and is likely to keep rising over the summer as the impact of the conflict in the Middle East fully trickles through to the economy.
• The Bank of England could be forced to increase its base rate of interest later this year if oil prices remain high, potentially bringing rates as high as 5.5%.
• However, most are expecting the base rate to remain flat or be increased only once in 2026. As a result, mortgage rates fell at the fastest pace for over a year earlier this month as lenders readjusted their offerings.
• Going forward, mortgage rates are likely to remain steady or increase slightly, unless the conflict erupts again. See what rate you could get today from +100 lenders
• House price growth to be modest, somewhere in the range of 1-5%, though London and the South East may see slower rises compared to other regions like the North.

Will mortgage rates go down in 2026?

Although nothing is known for certain, we predict mortgage rates will stay steady in 2026, or possibly increase if a base rate rise looks more likely. Right now, inflation is expected to rise over the coming months as we start to feel the full impact of the conflict in the Middle East on the UK economy.

As a way to control inflation, the Bank of England is likely to increase its base rate of interest at some point this year if oil prices remain high. Most of the market is expecting this to happen at least once, but multiple increases are not out of the question and could send mortgage rates climbing.

Unfortunately, this means the sub-4% mortgage deals we saw in February are long gone, with the average two-year fixed rate mortgage deal now standing at 5.79%, up from 4.83% at the start of March, and the average five-year deal standing 5.69%, up from 4.95%.

Although some of Britain’s biggest mortgage lenders started cutting their mortgage rates a few weeks ago, this isn't a sign of the tide turning. Instead, this reflects lenders readjusting their expectations on the back of the fragile peace talks, instead of a market-wide shift.

With one or potentially multiple base rate increases on the cards, mortgage rates are likely to stay at their current level or increase, as we continue through 2026. Right now, the lowest 2-year fixed and 5-year fixed rate deals offered by our panel of over 100 lenders is 4.55% and 3.61% respectively, but these could change. See what rate you could get without applying today.

What does this mean for your mortgage?

If you have a mortgage deal ending in 2026, you'll want to watch these trends closely. If the base rate does increase significantly, this could mean mortgages become much more unaffordable. Instead of burying your head in the sand, understand your options now and lock in your best deal at today's current rates. See what mortgage rates you could be eligible for without applying with Tembo.

Should I fix my mortgage for longer?

At the moment, 2-year fixed rate deals available on the market are higher than 5-year fixed rate deals. This reflects the fact that lenders are expecting the base rate to increase in the short term due to the impact of the conflict in the Middle East.

However, it's harder to predict what the economy will look like over a longer time period. So while 5-year fixed rate deals may be lower right now, this doesn't mean you won't be paying an above-market rate in 4 years' time if you lock in now for longer.

It's always wise to get expert advice tailored to your circumstances to understand the best mortgage options available, and work out how long you should lock in. Our award-winning team can help you make an informed decision about whether a longer fix is right for you.

What will happen to mortgage rates over the next 5 years?

Mortgage rates are likely to stay at a similar level to what they are now over the next 5-years, as the fallout from the conflict in the Middle East means rates will likely stay higher for longer. We could still see mortgage rates gradually decrease, but this isn't likely to happen in 2026 or even 2027. But if inflation proves stubborn, we could see rates plateau at their current level or increase.

As ever, this is just a prediction based on current expectations, not guarantees; mortgage rates could change significantly over the next few years.

What will happen to house prices in 2026?

House prices are influenced by a delicate balance of supply, demand, and borrowing costs. As mortgage rates change, so does buyer affordability, which directly impacts property values.

Higher mortgage rates generally reduce buyer demand. When it becomes more expensive to borrow money, fewer people can afford to enter the market or move up the property ladder. If mortgage rates stay at their current levels or rise in 2026, we could see more buyers hold off buying.

This reduction in demand, especially if it lags behind the supply of new homes, would likely lead to low growth in house prices, or even house prices to decline in the short term. At the moment, some experts predict house price growth could stagnate in 2026, or stay low at the 1-5% mark. This indicates a subdued market rather than a boom or a bust situation.

What should you do?

Deciding whether to buy, sell or remortgage a home is a personal decision that depends on your financial situation and life goals. However, understanding the market predictions for 2026 can help you make a more informed choice.

Will 2026 be a good year to buy a house in the UK?

If you're thinking of buying in 2026, the potential for higher mortgage rates may change what you can afford, as a higher rate could increase your monthly payments or cause you to reduce your overall borrowing to accommodate the higher rates.

💡Tembo's top tips:

• Start saving now: As a general rule, the higher the deposit you can put down, the better mortgage rates you'll have access to.
• Improve your credit score: Lenders offer the best rates to borrowers with strong credit histories. Take steps now to check your score and make improvements if needed.
• See your mortgage options now without applying so you understand your true affordability and can explore ways to boost your budget. Get started here for free

Will 2026 be a good year to sell a house in the UK?

For those looking to sell, 2026 could be a difficult time. Reduced buyer demand driven by higher rates could make it harder to find a buyer and achieve a good price for your property, especially if overall house price growth is sluggish.

💡 Tembo's top tips:

• Price realistically: Especially in a subdued market, those who are able to buy will be well-informed. An overpriced home will struggle to sell. Work with an estate agent to set a competitive asking price based on local market conditions. Or generate a free report aggregating 240+ data points for your property when you complete your details online with us.
• Get your home ready: Make any necessary repairs or improvements well in advance to ensure your property stands out.
• Know your next move: Are you buying another property? Understand your budget and what you can afford before you put your home on the market. By using our complete your details with us for free to see all your mortgage options from +100 lenders, including your buying budget and indicative mortgage rates. Get started today.

Will 2026 be a good year to remortgage in the UK?

If your current mortgage deal is ending in 2026, you're not alone - approximately 1.8 million other fixed rate deals are also set to end this year. However, rising interest rates could mean you're able to remortgage onto a more expensive deal, potentially raising your monthly payments.

💡 Tembo's top tips:

• Start early: Don't wait until your current deal is about to expire. You can typically lock in a new mortgage offer up to six months in advance. Plus, through Tembo you can benefit from our free rate checking service*. So if rates drop after you've locked in a new deal, just ask your dedicated broker to reapply for you at no extra cost.
• Consider your goals: Are you looking to lower your payments, release equity, or pay off your mortgage faster? Knowing your goals will help you find the right remortgage product for your needs. We can help you explore all your options.
• Review all of your options: Don't just automatically renew with your current lender. Use a service like Tembo to compare deals from over 100 lenders to ensure you're getting the best possible rate

*Fee-free mortgage advice is subject to eligibility, see terms & conditions here.