The last couple of months have seen a noticeable shift in both interest rates and mortgage pricing.
The mortgage market has been anything but quiet. In fact, the period from late November through to mid January has been one of the most competitive we have seen for some time. This has been driven by changing expectations around the Bank of England base rate and the wider economic outlook.
Bank of England and the Economic Backdrop
Towards the end of 2025, economic data started to soften. UK GDP unexpectedly contracted by 0.1%, raising fresh concerns around economic growth. At the same time, inflation remained stubbornly above target, creating a difficult balancing act for the Bank of England.
Despite these challenges, the Monetary Policy Committee moved to reduce the base rate to 3.75%, signalling a shift away from the more restrictive stance seen over the last couple of years. While inflation has since edged back up to around 3.4%, the rate cut reflected growing concerns that holding rates too high for too long could further slow the economy.
The key message from the Bank of England remains consistent. Any future changes will be dependent on data, with inflation, growth and wage figures all playing a role. This uncertainty is an important context when looking at what has been happening in the mortgage market.
Mortgage Rates and Lender Activity
Mortgage rates had already started to move before the base rate decision, as lenders anticipated a change in direction.
In early December, Nationwide launched its lowest fixed rate since September 2022, dipping below 3.6%. This set the tone for what followed. Within weeks, the number of lenders repricing products doubled week-on-week, according to Moneyfacts, as competition intensified.
Since then, we have seen a steady stream of rate cuts across the market:
- Santander, Barclays and NatWest all reduced fixed rates across residential and buy-to-let ranges
- Halifax and Virgin Money joined what many described as a full-scale price war
- Nationwide continued to trim rates, particularly for first-time buyers and home movers
- Specialist and intermediary lenders, including Accord, Coventry, TMW, Newcastle and Foundation, also made pricing adjustments
At several points in December and January, lenders were repricing more than once a week, something that was rare during the period of rising rates. While not every borrower will qualify for the very lowest headline rates, the direction of travel has clearly been downward.
What This Means in Practice
Mortgage rates do not move in a straight line, and they are not directly linked to the base rate. However, the last two months have shown how quickly pricing can change when lender confidence improves.
For borrowers, this has created a market where:
- Fixed rates have fallen more quickly than many expected
- Competition has increased across both purchase and remortgage products
- Lenders are actively adjusting pricing to attract new business
At the same time, inflation remaining above target means volatility has not disappeared. We have already seen periods where rate cuts pause or briefly reverse following stronger inflation data.
Our Thoughts
The last couple of months have been a good reminder that mortgage markets move ahead of headlines.
Lenders began cutting rates before the Bank of England acted, based on expectations rather than decisions. Since then, competition has continued to drive pricing, even while inflation remains a concern.
For anyone looking to move or remortgage in 2026, flexibility remains key. Securing a product early, while retaining the ability to switch if rates improve further, can help manage uncertainty without committing too soon.
Mortgage rates are undoubtedly lower than they were this time last year. However, the economic backdrop suggests we should still expect periods of fluctuation rather than a smooth downward path.
As always, the right approach will depend on individual circumstances, timescales and risk appetite.
Information correct at time of writing – January 2026.
