Mortgage Price War Intensifies as UK House Prices Hit Records and Rates Fall
- January 2026

UK mortgage rates have been edging down as lenders compete harder for business, while the housing market has started 2026 with a notable jump in asking prices. For buyers and remortgagers, that combination can feel like a moving target: borrowing costs are easing, but sellers are also testing higher prices in some areas.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

What Is Moving UK Mortgage Pricing

Fixed-rate mortgages are largely priced off wholesale funding costs and market expectations for future Bank of England Bank Rate. When investors think Bank Rate is more likely to fall (or fall sooner), wholesale rates can ease and lenders often pass some of that through via lower fixed rates.

The Bank of England cut Bank Rate to 3.75% on 18 December 2025, and the next decision is due on 5 February 2026. That matters most immediately for many tracker mortgages and some lender variable rates, but it can also influence expectations that feed into fixed-rate pricing.

At the same time, lenders are facing a crowded market. Many borrowers are coming up to the end of older fixed-rate deals, and lenders want to win remortgage business as well as purchase activity. Competition can show up as rate cuts, fee changes, or more generous income multiples and criteria (subject to affordability and eligibility).

Mortgage Price War: How Lenders Are Competing

Major lenders have started 2026 by cutting selected mortgage rates, particularly where they want to attract first-time buyers, home movers, or borrowers with larger deposits. These cuts can be rapid and tactical, and deals can change frequently.

For example, Nationwide announced reductions across selected first-time buyer and home mover products in mid-January 2026, including cuts at higher loan-to-value tiers as well as lower loan-to-value tiers (rates and fees vary by product and are subject to eligibility and affordability checks).

Competition is not limited to residential lending. The Mortgage Works (Nationwide’s buy-to-let arm) also announced rate reductions across selected buy-to-let products around the same time, reflecting a broader push to win share as funding conditions improve. Buy-to-let pricing can still be sensitive to rental cover calculations and tax changes, so landlord outcomes vary widely.

One practical point for consumers: the headline rate is only part of the picture. Fees, incentive packages, early repayment charges, and the lender’s revert rate after the deal ends can all materially affect the total cost. In a fast-moving “price war”, those details can change as quickly as the rate.

House Prices And Demand: Records In The Asking-Price Market

The standout housing headline for January is Rightmove’s “largest ever January price jump”. Rightmove said the average asking price of homes coming to market rose to £368,031 in January 2026, up 2.8% month-on-month, and that this is the largest increase seen in January. Rightmove also noted that asking prices are only back to around summer 2025 levels after budget-related uncertainty, and that supply is high for this time of year, which can keep buyers price-sensitive.

It’s important to separate asking prices from achieved sale prices. Asking prices can move quickly with sentiment, while completed sale price indices often move more slowly and can look different depending on mix, region, and the stage of the transaction pipeline.

Other major indices ended 2025 on a softer note. Nationwide reported annual house price growth slowing to 0.6% in December 2025 with a small monthly fall, while still describing the wider market as “resilient” through 2025 overall.

Halifax’s index also showed a monthly fall in December 2025 and modest annual growth, with Halifax pointing to easing affordability pressures as rates reduce, alongside the reality that affordability constraints still matter for many households.

For a slower-moving, transaction-based view across the UK, the UK House Price Index (using sales data) showed the average UK house price at £269,862 as of October 2025, with a 1.7% annual rise and a 0.1% monthly fall.

The takeaway: “records” are currently most obvious in the asking-price market (Rightmove’s January jump). Whether that translates into sustained sale price growth depends on mortgage affordability, supply, local conditions, and how confident buyers feel about their budgets.

Bank Of England, SONIA And Gilt Yields: Why Markets Matter To Fixes

Bank Rate is the headline policy rate, but fixed mortgage pricing is more closely linked to market rates used by banks to hedge and fund lending. One benchmark people hear about is SONIA (Sterling Overnight Index Average), which reflects the average rate paid on sterling overnight wholesale funding. SONIA feeds into many financial contracts and is part of the plumbing behind swap markets that influence fixed-rate mortgage pricing.

After the December Bank Rate cut, SONIA moved lower. The Bank of England’s daily SONIA series shows levels around 3.72% in mid-January 2026.

Government bond yields (gilts) also matter because they influence broader funding conditions and investor expectations. In mid-January 2026, the yield on 10-year UK government bonds fell to around 4.34%, according to reporting at the time, reflecting a shift in rate expectations and sentiment.

Key Numbers Snapshot

• Bank of England Bank Rate: 3.75% (next decision due 5 February 2026)

• SONIA (daily): around 3.72% in mid-January 2026

• Rightmove national average asking price (January 2026): £368,031 (+2.8% month-on-month)

• Nationwide average price (December 2025): £271,068 (annual +0.6%, monthly -0.4%)

• Halifax average price (December 2025): £297,755 (annual +0.3%, monthly -0.6%)

• UK House Price Index average (October 2025): £269,862 (annual +1.7%, monthly -0.1%)

• UK Finance forecast for 2026: gross mortgage lending £300bn; around 1.8 million fixed-rate mortgages due to end in 2026; external remortgaging forecast to rise

Figures as of 19 January 2026 London.

What This Could Mean For First-Time Buyers And Home Movers

For first-time buyers, falling mortgage rates can help affordability at the margin, but higher asking prices can offset some of that benefit, especially in areas where supply is tight or competition is strong. Rightmove’s January data suggests demand rebounded quickly after Christmas, which can encourage sellers to aim higher, at least initially.

Deposit size and loan-to-value still play a big role in which rates are available. As lenders compete, improvements can show up at higher loan-to-value tiers, but pricing gaps often remain between (for example) 95% loan-to-value and 60% loan-to-value products. A qualified mortgage adviser can help explain how your deposit, income structure, and credit profile may affect available options.

Stamp Duty Land Tax is also a key cost for many buyers in England and Northern Ireland, and it can materially affect how much cash you need at completion. Current guidance sets out thresholds, including first-time buyer relief up to £300,000 (with conditions and limits that depend on the purchase price).

If you’re trying to model overall upfront costs, it can help to separate (1) deposit, (2) Stamp Duty Land Tax, and (3) conveyancing and moving costs. MoneyHelper’s stamp duty calculator summarises the main rules and can help buyers sense-check costs (rules differ in Scotland and Wales because different property taxes apply).

At the higher end of the market, policy risk can influence sentiment. HM Treasury has published details on the High Value Council Tax Surcharge for England from April 2028 for homes valued at £2 million or more, including banding and annual charge levels. This is not an immediate 2026 change, but it has been part of market conversations and may affect some high-value segments and buying decisions.

What This Could Mean For Remortgagers And Borrowers On Variable Rates

The remortgage market is a major driver of lender competition in 2026. UK Finance expects around 1.8 million fixed-rate mortgages to end in 2026, which can increase switching activity and intensify pricing competition as lenders try to retain and win customers.

If you are on a tracker mortgage linked to Bank Rate, changes in Bank Rate typically feed through relatively quickly, depending on the terms of your mortgage. Some lender variable rates may also change after a Bank Rate decision, but the timing and size can vary by lender and product.

Borrowers also need to be aware of timing and product mechanics. Many fixed-rate products include early repayment charges during the deal period, and switching too early can be costly. Some lenders allow internal product transfers with different rules from external remortgages, and those options can change over time.

For households with non-standard income (for example, contractors, self-employed applicants, or seafarers with overseas allowances), the key issue is often how income is assessed and evidenced. In a competitive market, lenders may still differ meaningfully on acceptable income types, contract length requirements, and currency treatment, so comparisons can be valuable.

Buy-To-Let, Landlords And The Rental Market

Buy-to-let is being pulled in two directions: mortgage rates are easing, but rental growth is moderating in some measures and landlords continue to face changing tax and regulatory conditions.

The Office for National Statistics reported private rent annual inflation easing in London to 2.8% in the 12 months to November 2025, alongside continued regional variation. This can matter for landlords because rent growth affects interest cover calculations and the ability to absorb higher mortgage costs at refinance.

Rightmove’s rental tracker, meanwhile, suggested rents outside London fell quarter-on-quarter in Q4 2025, while still showing modest growth across 2025 overall and a forecast for further rises in 2026. Different datasets measure different parts of the market, but both point to a cooler pace than the peak of the recent rental surge.

For buy-to-let mortgage pricing specifically, UK Finance reported the average interest rate across all new buy-to-let loans at 5.0% in Q2 2025 (an aggregate measure across the market at that time). The direction of travel since then has been influenced by wholesale rates and lender competition, but individual landlord pricing still depends heavily on loan-to-value, property type, and rental income.

Arrears data is also worth watching as a broad health check. UK Finance reported that homeowner and buy-to-let mortgages in arrears fell quarter-on-quarter in Q3 2025, while possessions increased slightly but remained low compared with long-term averages.

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One, we can explain your options and timings based on your specific circumstances.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

FAQs

1) Why are UK mortgage rates falling in early 2026?
Mortgage rates can fall when wholesale funding costs ease and lenders compete harder for new business. The December 2025 cut in Bank Rate and shifting market expectations have supported that trend, but day-to-day pricing can still move quickly.

2) Does the Bank of England Bank Rate directly set fixed mortgage rates?
Not directly. Bank Rate has the most immediate impact on many trackers and some variable rates. Fixed rates are more closely linked to wholesale market rates and expectations about future Bank Rate.

3) Are two-year or five-year fixed rates better when rates are falling?
It depends on your budget stability needs, appetite for payment changes, and how you view future rate moves. Two-year fixes can reprice sooner; five-year fixes can offer longer payment certainty. A qualified mortgage adviser can explain trade-offs without assuming rates will move in any one direction.

4) Do record asking prices mean house prices will keep rising?
Not necessarily. Asking prices reflect seller confidence and can move faster than completed sale prices. High supply and affordability constraints can limit how much of an asking-price jump translates into achieved prices.

5) What should remortgagers watch if their deal ends in 2026?
Key factors include your reversion rate after the fixed period, any early repayment charges, how long your new rate is valid for, and whether product transfer options differ from external remortgaging. Timing can matter because rates and criteria can change.

6) How does Stamp Duty Land Tax affect first-time buyers?
Stamp Duty Land Tax rules vary by country within the UK. In England and Northern Ireland, first-time buyers may qualify for relief up to certain price limits, which can reduce upfront costs, but it depends on the purchase price and eligibility.

7) What are buy-to-let landlords watching most in 2026?
Landlords are typically focused on mortgage rate moves, rental market conditions, and interest cover calculations. Changes in taxes and regulation can also affect net returns and refinancing choices, so it helps to review the whole picture.