Will UK Interest Rates Rise in 2026?
Should you fix your rate now?

If you’re wondering whether UK interest rates could rise in 2026, you’re not alone. The Bank of England has already cut Bank Rate to 3.75%, but inflation is still above target and wage growth remains a key watchpoint. For many households, the real question is not “will rates rise?” but what is moving UK mortgage pricing, and how to choose between fixing for certainty versus staying flexible if rates drift down.

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 In 2026

UK mortgage pricing is being shaped by a mix of (1) the path of inflation, (2) pay growth and services inflation, (3) how quickly the economy is growing, and (4) what markets think the Bank of England will do next. Even when Bank Rate is unchanged, fixed mortgage rates can move because lenders price fixed deals off wholesale funding and interest rate expectations, not just today’s base rate.

A useful way to think about this: Bank Rate is the “headline” rate, but fixed-rate mortgages often reflect where markets expect Bank Rate to go over the next two to five years, plus lenders’ funding costs, operational costs, and appetite to compete.

In late January 2026, market commentary has focused on whether sticky inflation and wages could slow the pace of cuts, rather than pointing clearly towards renewed rate rises. That “cuts, but cautious” backdrop can still create day-to-day volatility in fixed-rate pricing.

Bank of England Bank Rate: Where We Are Now

Bank Rate currently stands at 3.75%. The most recent decision, dated 18 December 2025, was a 0.25 percentage point cut. The Bank of England’s own guidance on its explainer page is that rates are on a “gradual downward path”, while also stressing that each further cut depends on incoming data, particularly pay growth and services inflation.

The December 2025 decision was closely balanced. In the Monetary Policy Summary for the meeting ending 17 December 2025, the Monetary Policy Committee voted 5–4 to reduce Bank Rate to 3.75%, showing that there is still disagreement on the committee about the speed of easing.

Looking ahead, the Bank of England has confirmed the 2026 Monetary Policy Committee announcement dates, with the next Bank Rate decision due on Thursday 5 February 2026. These dates matter for borrowers because mortgage pricing can adjust quickly around major data releases and Bank Rate decisions.

Inflation, Wages And Growth: The Data That Matters

Inflation is still the central driver of interest rate decisions. The latest Office for National Statistics bulletin shows CPI inflation at 3.4% in the 12 months to December 2025, up from 3.2% in November. For mortgage borrowers, the detail matters: “core” CPI (excluding energy, food, alcohol and tobacco) was 3.2%, and services inflation was 4.5% in December 2025, which is one reason the Bank of England keeps emphasising that it wants to see domestic price pressures ease convincingly.

Wage growth is the second big piece of the puzzle because it can feed into services inflation. In the Office for National Statistics release for January 2026 (covering September to November 2025), annual growth in regular pay (excluding bonuses) was 4.5%, and total pay growth (including bonuses) was 4.7%. If wages cool gradually, it supports the case for further cuts; if wage pressures stay firm, the Bank of England may move more slowly.

Economic growth affects the “need” for rate cuts. The Office for National Statistics monthly GDP estimate shows the economy grew by 0.3% in November 2025, after a fall of 0.1% in October 2025. A slow-growing economy can strengthen the argument for lower rates, but the Bank of England will still prioritise returning inflation to target.

It’s also worth watching what the Bank of England’s policymakers are saying about risks. In a speech published on 23 January 2026, Monetary Policy Committee member Megan Greene discussed how global central bank decisions can affect UK inflation and growth, and why policy divergence can matter for the UK outlook. For borrowers, the practical takeaway is that global shocks (energy prices, supply chains, exchange rates, overseas rate moves) can still affect UK inflation and, in turn, interest rate decisions.

How Fixed Mortgage Rates Are Set: Swaps, Expectations And Lender Competition

Most fixed mortgage rates are heavily influenced by wholesale rates (often described in the market as swap rates), which embed expectations for future Bank Rate. When investors become more confident that Bank Rate will fall, wholesale pricing can ease and lenders may be able to reduce fixed-rate pricing. When inflation surprises higher, or wage data looks stubborn, wholesale pricing can shift up, and fixed mortgage rates can follow.

This helps explain why borrowers sometimes see fixed rates change even when Bank Rate has not moved. It also explains why “waiting for a cut” can be frustrating: by the time Bank Rate is cut, markets may have priced much of it in already, and lenders may have adjusted their fixed-rate deals earlier.

Competition between lenders is the other moving part. In January 2026, Moneyfacts reported that average fixed mortgage rates remained below 5%, with the average two-year fixed rate at 4.83% at the start of January 2026 and the average five-year fixed rate at 4.91%. Averages are not the same as the best available deals (which depend on loan-to-value, fees, and eligibility), but they give a useful snapshot of broader pricing momentum.

Broker and consumer reporting also highlights that some headline fixed rates have moved lower early in 2026, with “as low as” pricing appearing on certain products for some borrowers. These deals can change quickly, and the overall cost depends on fees, term, and whether you meet the criteria.

Fix Now Or Wait: A Practical Decision Framework

There isn’t a universal “right” answer to whether you should fix your rate now. A better question is which risks you’re trying to manage: payment certainty, or the possibility that rates fall and you could refinance onto a lower deal later.

Here are the main considerations many borrowers use when deciding:

• How soon your current deal ends: if you are approaching the end of a fixed rate, you may want to avoid drifting onto a lender’s standard variable rate, which can be higher than fixed deals.

• Your tolerance for payment changes: fixing can make budgeting easier, while tracker and variable deals can move up or down.

• The size of your mortgage and your household buffer: small changes in rates can have a bigger monthly impact on larger balances.

• Your plans over the next two to five years: moving home, overpaying, or refinancing can trigger early repayment charges on some fixed deals.

• Fees and total cost, not just the headline rate: a slightly higher rate with lower fees can sometimes be cheaper overall depending on the loan size and how long you keep the deal.

• Eligibility and affordability: lenders’ criteria, credit scoring, and affordability tests can affect what you can access, even when market rates look lower.

If your priority is predictability, fixing can reduce uncertainty even if rates drift down later. If your priority is flexibility, a tracker or shorter fix may feel more comfortable, but you would be taking the risk that rates fall more slowly than expected or, in a less likely scenario, rise again if inflation re-accelerates.

One more factor for 2026 is pipeline pressure: UK Finance expects 1.8 million fixed rate mortgages to come to an end in 2026. That volume can influence borrower behaviour and lender competition, but it can also mean some households face refinancing decisions under time pressure.

What This Could Mean For First-Time Buyers, Remortgagers And Buy-To-Let

For first-time buyers, the key issue is affordability and stress testing. Even if rates are easing, lenders will still assess income, outgoings, and overall affordability, and your choice of fixed versus variable can change how comfortable your budget feels month to month. House price signals into early 2026 have been mixed across indices, with Halifax reporting an average house price of £297,755 in December 2025 and annual change of +0.3%, while also noting a monthly fall of -0.6%.

For homeowners and remortgagers, activity in refinancing is worth watching. Bank of England “Money and Credit” data for November 2025 showed net mortgage approvals for house purchase at 64,500 and approvals for remortgaging (with a different lender) rising to 36,600. Higher refinancing volumes often coincide with more rate shopping and product transfers, which can support competition but also means borrowers benefit from planning early.

For buy-to-let landlords, the focus is usually cashflow and coverage ratios, not just headline rates. A higher-for-longer base case can keep stress tests tighter, while gradual cuts could improve monthly cover over time. It is also sensible to keep an eye on fees, rental void assumptions, and how fixed-rate terms align with your rental strategy.

Why Speak To Mortgage One Before You Choose A Deal

Rate headlines are useful, but your decision typically comes down to personal numbers and timing. Speaking to Mortgage One can help you turn “market noise” into a clear plan, without guessing. A qualified mortgage adviser can explain the trade-offs between fixing and staying flexible, and help you understand costs and constraints that are easy to miss when you’re only comparing headline rates.

Reasons borrowers often choose to speak to Mortgage One include:

• Clarity on timing: understanding when you can secure a new deal (often months before your current fix ends) and how to avoid unnecessary time on a higher revert rate.

• Total-cost comparisons: looking at fees, incentives, and the true cost over the initial period, not just the headline interest rate.

• Early repayment charges and flexibility: checking whether overpayments, porting, or moving home could change the best-fit (or most suitable) option.

• Complex income support: helping borrowers with variable income (including seafarers, contractors, and expatriates) present affordability in a way lenders understand, where eligible.

• Remortgage admin and lender criteria: navigating documentation, valuations, credit checks, and criteria changes that can affect what’s available.

• Buy-to-let structure: weighing product terms against rental strategy and cashflow needs, including how fixed terms align with planned refurbishments or refinancing.

Mortgage rates can change quickly and are subject to eligibility and affordability checks. A conversation with a qualified mortgage adviser can help you understand which options are realistic for you, and what the risks and trade-offs look like before you commit.

Key Numbers Snapshot

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

• CPI inflation: 3.4% in the 12 months to December 2025 (services inflation 4.5%; core CPI 3.2%).

• Regular pay growth: 4.5% (September to November 2025); total pay growth 4.7%.

• Average mortgage pricing snapshot (start of January 2026): two-year fixed 4.83%; five-year fixed 4.91% (Moneyfacts averages).

Figures as of 25 January 2026 London

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. Will UK interest rates rise in 2026?
Most commentary is focused on how quickly rates could fall rather than a return to sustained rises, but the Bank of England can change course if inflation proves persistent.

2. When is the next Bank of England rate decision?
The next Bank Rate decision is due on 5 February 2026, with further scheduled announcements throughout 2026.

3. Why can fixed mortgage rates change even if Bank Rate stays the same?
Fixed rates often reflect wholesale pricing and expectations for future Bank Rate, plus lenders’ funding costs and competition, so they can move independently of the base rate.

4. Should I fix my mortgage rate now or wait?
It depends on your deal end date, budget comfort, and plans. Fixing can add payment certainty; waiting can preserve flexibility if rates fall, but that comes with risk.

5. What should I compare besides the headline interest rate?
Fees, total cost over the initial period, early repayment charges, incentives, and whether you meet eligibility and affordability requirements.

6. How early can I arrange a remortgage?
Many borrowers can secure a new deal months before their current fix ends, but timing varies by lender and product, and rates can change.

7. What if my income is irregular or overseas-based?
Different lenders assess irregular, contract, seafarer, or expatriate income in different ways. A qualified mortgage adviser can help you present documents and options that fit lender criteria.