News > Mortgage Rates Are Falling: What’s Happening and Why It Matters

Mortgage Rates Are Falling: What’s Happening and Why It Matters

Wollit Team2 minute read · Updated 11th December 2025

Mortgage rates in the UK have started to fall again, with lenders cutting the cost of both two-year and five-year fixed deals. For the first time in a while, the mortgage market is showing signs of easing — and it’s happening across several major banks and building societies.

Although this is big news for people buying or remortgaging, it’s also worth understanding even if you’re renting or not planning to buy yet. Changes in mortgage rates affect the whole housing market, from house prices to rental trends.

Here’s a simple explanation of what’s going on.

Mortgage Rates Are Now Among the Lowest Since the 2022 Crisis

Several lenders have reduced their rates in anticipation of interest rate cuts and improved economic conditions. Recent reporting shows that lenders have started offering significantly lower rates than we’ve seen in the past few years, and competition between banks is picking up again.

In short:

Mortgage deals are becoming cheaper
More lenders are cutting rates at the same time
Better deals are expected to continue into 2026

This shift follows months of high borrowing costs after the financial instability of 2022–2023.

Why Rates Are Falling Now

There are a few reasons behind the drop:

Inflation is easing Inflation has been falling from its post-crisis highs, and forecasts suggest it could fall further due to economic policy changes. Lower inflation usually leads to lower interest rates over time.
The Bank of England may cut rates next year Markets expect interest rate cuts in 2026, and banks are adjusting their products early to stay competitive.
Lenders want borrowers again The mortgage market slowed down sharply when borrowing became expensive. Cutting rates is one way lenders attract customers back.

Together, these changes mean mortgage products are slowly becoming more affordable.

Does This Mean House Prices Will Fall Too?

This is the big question — and the answer is mixed.

Lower mortgage rates often increase demand for buying, which can stabilise or even lift house prices. That said, the market is still adjusting after years of high costs, so it’s too early to say if prices will fall meaningfully.

Recent analysis found that first-time buyers are currently in one of the strongest positions they’ve had in a decade, partly due to the rate cuts and slightly softer house prices.

So while prices aren’t collapsing, the buying environment is becoming a little more favourable.

Why Renters Should Care About Falling Mortgage Rates

Even if you’re not buying:

Landlords with mortgages may face lower costs If landlords remortgage onto cheaper rates, it could reduce pressure for future rent increases.
More people might choose to buy If more renters leave the rental market to become homeowners, demand for rentals could ease slightly over time.
It may shift long-term plans If you’re working on your credit or saving, lower mortgage rates give hope that buying might become more achievable in the next couple of years.

This isn’t an overnight change, but it is a meaningful shift after years of rapidly rising costs.

If You’re Hoping to Buy One Day

Lower mortgage rates don’t automatically guarantee easier buying conditions — lenders still look closely at credit scores, deposit size, income, and affordability.

But this environment does mean:

Saving goals may start to feel more realistic
Monthly mortgage payments could become more manageable
There may be more competition between lenders, which can help buyers

If someone is building their credit now, improving their score during this period could put them in a stronger position when they’re ready to apply for a mortgage.

In Summary

Mortgage rates in the UK are falling for the first time in a meaningful way since the financial shocks of 2022, and banks are becoming more competitive with new deals. This could make borrowing cheaper for future buyers and may slowly influence the wider housing market.

Even if you're renting, this shift matters — it can affect rental trends, future affordability and long-term options. The next year could bring more rate cuts and better deals, giving people time to prepare their finances and credit for when they’re ready to take their next step.