UK Mortgage Market Update: What Estate Agents Need to Know (February 2026)

The UK mortgage market continues to improve for borrowers. The Bank of England held Bank Rate at 3.75% in February, with the Monetary Policy Committee split 5-4 on the decision. Average fixed rates remain elevated but best-buy deals have dropped below 4%, and first-time buyer activity shows renewed confidence with the return of high-LTV lending.

For estate agents, this means stronger buyer pipelines, improved affordability, and more realistic expectations from applicants. The data points to a more active spring market.

Current rate environment

Bank Rate and MPC decision

The Bank of England’s Monetary Policy Committee voted 5-4 to hold Bank Rate at 3.75% at its 6 February meeting. Four members voted for a 0.25% cut, signalling growing appetite for monetary easing. The next MPC meeting is scheduled for 19 March 2026.

Source: Bank of England

Mortgage rates: averages vs best buys

The gap between average and best-available rates remains wide. Average fixed rates sit around 4.85% (two-year) and 4.94% (five-year) according to Moneyfacts. But best-buy rates for borrowers with solid deposits are significantly lower, with two-year fixes available from 3.55% and five-year fixes from 3.75%.

Source: Moneyfacts, Which?, lender data (February 2026)

This distinction matters for agents. The headline averages include higher-risk products and specialist lenders. Most qualified buyers with a 10%+ deposit are securing rates well below 5%.

Swap rates suggest further easing

Swap rates, which lenders use to price fixed-rate products, indicate markets expect gradual rate reductions. Two-year SONIA swaps sit at 3.42%, with five-year swaps at 3.66%. This suggests lenders have room to reduce fixed rates further, particularly if the MPC cuts Bank Rate in March.

Source: Bloomberg, Bank of England

First-time buyer trends

First-time buyer activity is strengthening on the back of improved rates and lending criteria.

Sub-5% rates now the norm

In January 2026, 93% of first-time buyers secured mortgage rates below 5%, up from 67% in January 2025, according to UK Finance lending data. This shift has materially improved monthly affordability for new entrants.

Higher LTV lending returns

A significant development is the return of higher loan-to-value lending. In January, 24% of first-time buyers took mortgages at 90% LTV or above, the highest proportion since 2008. This reflects both improved lender confidence and product availability.

Source: UK Finance, lender data

Affordability analysis

Wage growth outpaces inflation

Real wage growth is supporting affordability. Earnings grew 4.2% in the three months to December 2025 according to the ONS labour market bulletin, while CPI inflation sits at 3.0%. This 1.2 percentage point gap means borrowers’ purchasing power is improving in real terms.

Unemployment remains a watch point

Unemployment stands at 5.2%, above the long-term average. Payrolled employees fell by 134,000 year-on-year to 30.3 million in January 2026. This remains a consideration for lenders assessing employment stability, particularly for self-employed applicants and those in sectors with higher volatility.

Source: ONS, Bank of England

Stress testing adjustments

Some lenders have adjusted affordability stress tests in response to lower rate expectations. Where borrowers were previously tested at rates of 7-8%, some lenders now apply stress rates of 6.5-7%. This modest change improves maximum borrowing capacity by 5-10% for many applicants.

Outlook and forecasts

Rate expectations for 2026

Markets currently price in two to three Bank Rate cuts during 2026, which would take Bank Rate to 3.0-3.25% by year-end. The February MPC minutes explicitly stated that “on the basis of the current evidence, Bank Rate is likely to be reduced further” and that there “should be scope for some further cuts to Bank Rate this year.”

Source: Market consensus, broker forecasts

Lender competition intensifying

The mortgage market remains highly competitive. Lenders are vying for market share through rate reductions, fee-free products, and enhanced criteria for specific borrower types. This competition should keep downward pressure on rates through the first half of 2026.

Practical implications for agents

Buyer qualification

With best-buy rates now below 4% and averages continuing to fall, more applicants can qualify for their target borrowing amounts. Agents should:

• Re-engage applicants who were priced out in 2023-2024
• Update affordability calculations using current stress rates
• Highlight monthly payment improvements to hesitant buyers

Use the mortgage calculator to show buyers what current rates mean for their monthly payments. It pre-fills with the live Bank of England base rate plus a typical lender margin.

Pipeline management

The improving rate environment supports transaction volumes. Agents should expect:

• Stronger mortgage in principle to offer conversion
• Reduced fall-throughs due to financing issues
• Shorter time from application to offer

For context on current completion timelines, see our guide on how long it takes to sell a house in the UK.

Pricing conversations

While affordability has improved, buyers remain price-sensitive. Agents should:

• Use rate reductions to justify realistic asking prices
• Present monthly payment comparisons to demonstrate value
• Be prepared for buyers to negotiate harder on properties requiring significant work

Getting the price right from day one remains critical. Properties that need reductions take 2.4 times longer to sell than correctly priced stock. Agents considering their fee structure should factor in these longer marketing periods when advising on pricing strategy.

First-time buyer focus

With 90%+ LTV products returning and sub-5% rates standard, first-time buyers are re-entering the market in volume. Agents should:

• Ensure properties are presented with first-time buyers in mind
• Highlight Lifetime ISA eligibility where relevant (up to £450,000 purchase price)
• Be aware of lender criteria differences for new-build purchases

If you’re working with first-time sellers on the other side of these transactions, our guide on selling your home for the first time covers what they need to know.

Data sources

• Bank of England: Monetary Policy Committee decisions, SONIA swap rates
• Moneyfacts: Average mortgage rate data
• UK Finance: First-time buyer lending statistics
• ONS: Earnings, inflation, and unemployment data
• Bloomberg: Gilt yields and market pricing

This update was prepared on 23 February 2026. Agents should verify current rates and criteria with lenders and mortgage advisers before advising clients.