UK Mortgage Rates Forecast 2026: Below 3% Means a Major Boost for UK Property Investors

The UK property market is entering a more favourable phase, with leading mortgage brokers pointing to an increasingly positive UK mortgage rates forecast for 2026. Many now expect mortgage rates to fall below 3%, a shift that would materially strengthen UK property investment opportunities for domestic and overseas investors alike.

After a period of elevated borrowing costs, average mortgage rates have already begun to trend downward, falling from around 5% earlier this year to approximately 4.83% for a typical two-year fixed deal. With inflation easing and interest rates beginning to stabilise, industry sentiment suggests borrowing costs could continue to decline over the next 12 to 18 months.

Falling Rates, Improving Affordability

According to brokers across the UK, the Bank of England’s recent interest rate cut is likely to mark the start of a sustained easing cycle. Bob Singh, founder of Chess Mortgages, believes that in the absence of any major economic shock, interest rates will continue to decline through 2026, offering relief to borrowers coming off fixed-rate deals and those on tracker mortgages.

With an estimated 1.9 million mortgages maturing in 2026, lenders are expected to compete aggressively for new business — a dynamic that historically leads to more competitive rates and improved lending criteria.

Several brokers now believe the Bank of England base rate could fall to around 3% or slightly below by the end of 2026, reinforcing a broadly optimistic UK mortgage rates forecast for 2026. While a return to sub-2% borrowing is unlikely, the direction of travel is clear. Borrowing costs are moving meaningfully lower

Sub-3% Mortgage Deals Could Return

Ranald Mitchell, director at Charwin Mortgages, has described 2026 as a potential “mortgage comeback year,” suggesting that sub-3% headline rates could reappear for prime borrowers with lower loan-to-value ratios.

However, the opportunity goes beyond headline rates alone. Brokers are also anticipating more flexible affordability assessments, better recognition of real-world income, and more pragmatic credit policies — changes that could bring many buyers and investors back into the market after a cautious period.

For leveraged investors, particularly those focused on buy-to-let investment UK, this combination of lower rates and improved lending terms has a direct impact on long-term returns and portfolio sustainability.

What This Means for Property Investors

For UK-based and international buyers, falling mortgage rates strengthen the fundamentals behind many UK property investment opportunities:

• Improved cash flow as mortgage payments decrease

• Stronger leverage opportunities, amplifying returns on invested capital

• Higher affordability, supporting continued demand from owner-occupiers and tenants

• Greater market liquidity, encouraging transaction volumes and price stability

UK Buy-to-let investors, in particular, stand to benefit as rental yields across many UK cities remain robust, while financing costs decline. This dynamic supports positive cash flow and long-term capital growth, a combination highly attractive to international investors seeking income and stability.

A Stabilising, More Sustainable Market

Importantly, industry experts do not expect a return to the extreme volatility of the past decade. Lenders and regulators are increasingly focused on market stability, aiming to avoid sharp rate shocks that can unsettle borrowers.

As Ben Perks of Orchard Financial Advisers notes, while rates may dip into the high-2% range for safer lending profiles, the broader goal is a more balanced, predictable mortgage market — one that supports sustainable growth rather than boom-and-bust cycles.

A Positive Outlook for UK Property Investment in 2026

With inflation easing, borrowing costs declining, and lending conditions improving, the outlook for UK property investment opportunities in 2026 appears increasingly constructive.

For overseas investors, particularly those from the GCC, the improving UK mortgage rates forecast for 2026 reinforces the UK’s appeal as a stable and income-generating market. Key attractions continue to include:

• Long-term capital preservation

• Income in GBP

• A mature legal and financial system

• Growing rental demand in major cities

At Magnate Assets, we continue to monitor these trends closely and structure investment opportunities that align with evolving market conditions, ensuring our clients are well-positioned to benefit from the next phase of the UK property cycle.

If you would like to explore how falling mortgage rates could enhance your UK property investment strategy, our team is here to help.