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You might have seen our emails about the Bank of England base rate, or you have been watching it very closely yourself! It’s an important one as it’s the benchmark for borrowing costs across the UK. Lenders use it as one of the inputs when pricing mortgage products. As of early 2026, the base rate has been cut to around 3.75%. It’s the lowest it’s been in nearly three years, after we saw the previous increases, which were aimed at tackling inflation. Economists and lenders are saying they expect one or more rate cuts during 2026 if inflation continues to ease. Although remember, forecasts vary, so further cuts are never guaranteed! We’ll hear more on 5th February.

How is your mortgage type affected by the base rate?

• Tracker mortgages: move in line with the base rate (your rate = base rate + a fixed margin). If the base rate falls, your monthly payments usually fall too.
• Standard Variable Rate (SVR) / discount deals: not directly tied but often influenced by the base rate. Lenders may pass cuts on to you, but they don’t have to.
• Fixed-rate deals: your rate won’t change during the fixed term. But when you come to remortgage, the deals available are shaped by base rate expectations.

Let’s go deeper…

• If the base rate falls further toward ~3.0–3.5% by late 2026:

• Some mortgage interest rates, especially tracker and some variable deals, are likely to fall too. Experts suggest typical mortgage rates could drift into the low-3s (%) by the end of 2026, which is historically cheaper than recent years.
• If fixed rates fall too, monthly payments on new deals could be lower than they were in 2024–2025. Becoming more affordable for buyers or those remortgaging.

• If the base rate stays relatively flat or only modestly lower (e.g., ~3.5–3.75%):

• Mortgage rates may not fall much, and lenders may compete more on product features such as fees.
• Some borrowers won’t see much difference in monthly costs compared with a year earlier.

If you are a first-time buyer or new borrower, the lower base rates often reduce the headline cost of new mortgage products. It could improve affordability and encourage more borrowing if wages and deposit requirements also move in your favour.

For those remortgaging, if your fixed deal expires in 2026, the rates you’re offered may be lower if base rate cuts have been passed through by lenders. But remember, mortgage pricing also reflects market conditions and lender strategy, so deals can vary widely.

If you have an existing tracker or variable-rate holder, your payments could drop quickly following a base rate cut – often within a couple of months. But it all depends on how your lender manages the change. If you are an existing fixed-rate holder, your payments won’t change until your deal ends. However, when it comes to an end, you may find new options priced with the 2026 base rate outlook built in.

So where does this leave you?

We can help match the right mortgage type to your circumstances as rates continue to shift. Chat with us today to find the best deal for you.

Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. A fee may be charged for mortgage advice. The exact amount will depend on your circumstances.

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