With inflation falling to 3.6%, the outlook for anyone buying a house as we head towards 2026 is becoming more encouraging.
Buyers who have spent the past year navigating higher borrowing costs, concerns about mortgage rate rises and questions about affordability may finally see relief ahead.
Many are now asking not just whether rates will stabilise, but whether the New Year could bring materially cheaper mortgages.
Inflation dip fuels expectations of a December base rate cut
The fall in inflation has strengthened expectations that the Bank of England could cut the base rate at its final meeting of 2025 – a decision that would directly influence fixed-rate mortgage pricing as we move into 2026.
This shift is particularly significant given the turbulence of the past two years, during which many homeowners watched mortgage rate rises unfold at pace.
Peter Stimson, Director of Mortgages at MPowered, said: “The Budget is now the only barrier to a December base rate cut… A December cut now looks a racing certainty – provided the Budget doesn’t throw a spanner in the works.”
With lenders already adjusting to lower swap rates earlier in the year, many borrowers are once again asking: are mortgage rates going down?
Chancellor Rachel Reeves welcomed the drop in prices, saying: “This fall in inflation is good news for households and businesses across the country, but I’m determined to do more to bring prices down.”
Peter Stimson
Peter Stimson is the Director of Mortgages at MPowered, leading on market strategy, product insight and mortgage innovation. With extensive experience across the lending sector, he provides expert analysis on rate movements, affordability trends and the wider UK housing market.
Growing confidence as affordability recovers heading into 2026
Affordability is quietly improving. House prices have softened in many regions, deposits are trending lower, and borrowing power is rising – all helping to rebuild buyer confidence going into 2026.
Ben Thompson, Deputy CEO at Mortgage Advice Bureau, said: “The housing market has reset compared to three years ago: property prices are cheaper, borrowing power has vastly improved, and affordability is quietly recovering.”
Affordability is also improving, with buyers reassessing the minimum amount of money needed to buy a house as deposits fall and borrowing power strengthens.
Ben Thompson
Ben Thompson is the Deputy CEO at Mortgage Advice Bureau, overseeing strategy, market insight and customer-focused innovation. He is a prominent commentator on mortgage trends, housing affordability and market conditions affecting homebuyers nationwide.
What borrowers should do before entering 2026
With lender movements on hold until after the Budget – and a potential December rate cut on the table – experts warn borrowers not to wait passively.
Peter Stimson advises: “If you have a mortgage with a fixed rate that’s due to expire in the first half of 2026, it’s worth shopping around and talking to a broker now… You can reserve a new rate several months before the end of your current deal, ensuring you don’t lose out if rates start creeping back up in the New Year.”
For anyone buying a home, remortgaging, or planning a move early in 2026, the combination of falling inflation, stabilising rates, and improving affordability could make the next few months a pivotal window for action.
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