After a positive 2025 for the mortgage market, the positive activity seems set to continue into the new year.
Data from Moneyfacts shows that as as we enter 2026, borrowers had 7,158 mortgage deals to choose from, 650 more than in January 2025 and the highest number of deals recorded since October 2007.
Mortgage affordability also improved over 2025 as multiple cuts to the Bank of England base rate helped prompt lenders to lower interest rates. Consequently, the average two-year fixed rate plummeted from 5.48% at the start of 2025 to 4.83% at the start of 2026 while the average five-year fixed rate saw a slightly smaller drop from 5.25% to 4.91% over the same period.
“Borrowers and lenders will be in a state of optimism, off the back of a positive 12 months for the mortgage market in 2025. Expectations are high for a booming market in 2026,” said Rachel Springall, Finance Expert at Moneyfacts.
She added that the start to a New Year is typically a slow burner for mortgage re-pricing and that lower swap rates should incentivise lenders to pass on rate cuts in the coming weeks.
First-time homebuyers
Prospective borrowers planning to take their first step on the property ladder may feel optimistic about achieving their goals this year, particularly as more relaxed stress testing could help to improve their chances of securing an affordable mortgage.
Moreover, the number of low-deposit mortgage deals is at its highest level for almost 18 years, with 489 products at 95% loan-to-value (LTV) and 927 at 90% LTV to choose from at the start of 2026.
And, in terms of affordability, the picture looks just as positive as the average two-year fixed rate on deals at 90% and 95% LTV dropped by 0.04 percentage points between December 2025 and January 2026 to reach 5.09% and 5.29% respectively.
With potential for further base rate cuts in 2026, these rates may decline even more, further easing the affordability pressures on first-time buyers.
Despite this, Springall comments that “more progress to support underserved buyers would be welcomed amid a lack of affordable housing”.
“Innovation is set to become a key talking point this year, as expanding options for first-time buyers and modernising regulation are some of the key themes to be reviewed by the Financial Conduct Authority (FCA), laid out in its ‘Roadmap’ for the mortgage market,” she said.
The FCA confirmed that it will start consultations on proposed rule changes in early 2026 and aim to introduce the first rule changes later in the year.
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