After years of economic shocks and uncertainty, the UK mortgage market enters 2026 on far steadier ground. Having weathered rising interest rates, fiscal disruption and global volatility, the sector is now seeing renewed confidence, improving lending conditions and a more balanced outlook for buyers. Tom Davies, Group Financial Services Managing Director at Mortgage Scout, part of LRG, shares his predictions on interest rates, affordability and why 2026 could mark a more predictable and supportive year for the mortgage market.
“By the time we move into 2026, the mortgage market will have absorbed an extraordinary amount of economic pressure in the last 5 years. We have come through a pandemic, sharp interest rate rises, fiscal uncertainty and wider global shocks, yet house prices have remained remarkably resilient. If prices were going to fall away meaningfully, that moment has likely already passed. Instead, the market has stabilised.
We’re expecting interest rates to move towards the mid 3% range over the course of 2026, which will continue to support confidence, particularly once borrowing costs sit consistently below the 4% threshold. That is typically the point at which buyers begin to feel comfortable moving again.
Crucially, lenders want to lend. Product choice is improving, and competition is increasing, already leading to greater flexibility in criteria, especially for borrowers with smaller deposits or less traditional income profiles. That does not remove affordability pressures, but it does create a more supportive environment for buyers.
What becomes increasingly important in 2026 is the comparison between owning and renting. As rents continue to rise and mortgage costs ease, more people will reach a point where owning is not only achievable but cheaper than renting. When that balance shifts, decision-making becomes clearer, and activity follows.
We are not expecting a boom, but momentum will no doubt build from early this year.. The conditions are in place for perhaps a more predictable market than 2025, driven by confident, informed decisions rather than urgency or fear.”
