What does the New Year have in store for the Mortgage Market?

It is funny when I write this piece at this time of the year, as I always tend to feel the same. Relieved to see the back of the year and keen to usher in the promise and excitement of a bright, shiny New Year.

Once again, I am adopting the “cautiously optimistic” line, looking ahead to 2026. I’ve probably used it more than once in recent years, but I’m saying it with more conviction this time.

Although I am expecting a market that feels more like a careful thaw than a sudden spring, we could well see a January bounce now the Budget is out of the way, especially now we have the nice early Christmas present of a further Bank Base Rate cut.

The pricing we’re seeing in mid-December already reflects a world where rates can edge down further, and mortgage products starting with a 3 could well be the norm for the year ahead. This has a massive psychological effect on homebuyers as many potential borrowers’ last “normal” memory is rates with a 1, 2, or 3 in front. So, 3 point something feels like a return to safety, whilst a 4 still feels like the “new, higher world”.

I do expect another rate cut in the first quarter of next year, but the way SWAP rates are looking, congregating around the 3.5% level, it seems that there will not be too many cuts over the year. All those waiting to see a return to rates below 3% will be waiting in vain and potentially missing out on their dream home, as there is every expectation that house price growth will return once more.

This stability at rates that, for many homebuyers, will be affordable is key to welcoming in more borrowers. Added to this is the greater flexibility lenders now have around income multiples and affordability, and perhaps some capital adequacy, which will help us to see more innovation from lenders.

We should therefore see a calmer mortgage market with fewer “blink-and-you-miss-it” withdrawals, something we will all welcome. Whilst I do think there will be a gradual return of confidence, I’d still budget for the odd wobble as global events, economic data and policy moves, as well as market sentiment, continue to tug at SWAP rates.

All in all, 2026 is gearing up to be the year that lenders flex their competitive muscle once more, with more choice available now than there has been in many a year.

First-Time Buyers

Where first-time buyers are concerned, we have done plenty of tinkering with the engine this year, with lower rates, better affordability calculations, higher income multiples and a host of new products, but we still haven’t quite fixed the fundamentals.

The real answer is unsexy; build more homes, speed up planning, and support smaller, well-targeted deposit schemes that don’t simply inflate prices. Aside from this, getting a deposit together while rents continue their inexorable rise and the cost of living shows no sign of reducing anytime soon, remains an issue for many.

Whilst we do now have products offering 100% Loan to Value, (LTV) and deposits from as little as £5,000, yes the Building Society massive has stepped up and delivered, as well as some innovative tech-led lenders doing something different for First-Time Buyers, as an industry we need to keep innovating to come up with a new range of products and criteria that is effective in the new world of work and flexible needs.

I do think the market will be very First-Time buyer led in 2026, and educating the public that lending is very much available, because it is, is very important. I have heard anecdotally that many prospective buyers who do not get what they need or get declined the first time round assume they cannot get a mortgage full stop.

The good news is that proper advice opens a multitude of options, especially from smaller, specialist lenders and societies. The High Street is not just where it’s at.

Remortgages

2026 once more brings opportunity for all those whose current product will be coming to an end, and in an environment where rates are more palatable.

As ever, the best advice is to speak to us six months before your current rate expires, which gives us an opportunity to compare your existing lender’s offering to the rest of the market, especially as we expect competition between lenders in this space to be fierce.

Remember, it is not just about pressing a button with your existing lender, it is about reviewing what options are now best for you, as your life may have changed, looking at whether you can reduce your term and pay off your mortgage quicker or look at how you make your equity work for you. Considering options that your current lender may not have could save you money and put you in a better position to make more choices.

It just remains for me to wish you all a very Merry Christmas, Happy Holidays, and a healthy, peaceful and prosperous New Year.