Mortgage brokers predict rates will drop below 3% next year: "2026 has a mortgage comeback written all over it"

MORTGAGE brokers are predicting rates will drop below 3% next year as they said "2026 has a mortgage comeback written all over it".

They last week said sub-3.5% rates are expected soon following a sharper than expected fall in inflation to 3.2%.

The property market looks set to start 2026 with a bang as a mortgage rate war intensifies too.

Now, they are predicting rates to continue going down – even to sub-3% levels.

Ranald Mitchell, Director at Norwich-based Charwin Mortgages, said: “2026 has a mortgage comeback written all over it. We could genuinely see sub-3% headline deals for prime, low loan-to-value borrowers as lenders go to war for the best business. 

"But the bigger story is criteria. Smarter affordability, better recognition of real-world incomes and more pragmatic credit policy could bring thousands back into the market who have been locked out in recent years.”

Samuel Mather-Holgate, Managing Director & IFA at Swindon-based Mather and Murray Financial, said they could even go as low as 2.5%.

He added: “Are we seeing the return of the last decade with super low interest rates? Not really, but they are still declining and set for another 1% fall over 2026.

"Eventually they might settle at about 2.5% which is still significantly lower than the pre-financial crisis benchmark.”

Ben Perks, Managing Director at Stourbridge-based Orchard Financial Advisers, said banks will make sure the rates don't drop too low.

He continued: "Rates may well dip into the twos, especially for low loan-to-value, ‘safer’ lending. But I think banks will be reluctant to go too low. We’ve seen borrowers struggle to maintain payments when they’ve come off ultra-low rates so lower rates will be welcomed. 

“I think lenders and the regulator will move more towards stability, as the last thing anyone wants to see is a borrower getting hammered by overnight rate increases when their fixed rate product ends.”

Bob Singh, Founder at Uxbridge-based Chess Mortgages, said interest rates will keep falling next year.

He added: “In the absence of a financial calamity, interest rates in 2026 will bring much needed cheer to those on tracker mortgages and people coming off their fixed rates. With 1.9 million mortgages maturing in 2026, that’s a lot of financial decisions that have to be made. 

"Whilst the latest decision by the Bank of England Monetary Policy Committee was a close vote, the next one might see a larger majority if inflation continues to edge down. The base rate could fall to 3% or slightly lower by the end of next year, but not below 2.5%.”

Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said he doubted rates would fall that low.

He continued: "I doubt rates will fall that low in 2026 for the majority of borrowers. There is already the odd buy-to-let deal or retention product below 3%, but with a nose-bleed of a product fee, it makes it difficult to stomach at the moment. 

"We will need a near-car-crash of an economy to warrant mortgage rates going sub-3%. I think the base rate will find its happy place in the 3.25%-3.5% range, and mortgage rates will equally settle down just above that 3% figure."