Lower mortgage rates are expected to support modest house price growth in 2026, according to recent research from Moneyfactscompare.co.uk. This easing in borrowing costs could encourage more buyers to enter the market, which is significant for landlords monitoring demand and rental yields in the coming year.

Mortgage rates set to ease during 2026

Data indicates that at the start of 2026, a two-year fixed mortgage at 90% Loan-to-Value (LTV) was priced at an interest rate of 5.09%, with forecasts suggesting this could fall to 4.80% by the end of the year. This anticipated reduction aligns with expectations of a Bank of England base rate cut from 3.75% to 3.25% during 2026.

Adam French, head of news at Moneyfactscompare.co.uk, commented: “After more than three years of higher borrowing costs, even small cuts in mortgage rates can have a meaningful effect on buyer behaviour. With markets expecting at least one further 0.25 percentage point cut to the Base Rate, the mortgage landscape in 2026 may be more forgiving than at any point since 2021.”

For landlords, this potential easing in mortgage costs may translate into increased buyer activity and a more stable housing market, which can influence rental demand and property values.

Affordability challenges remain, especially for first-time buyers

Despite the expected rate reductions, affordability pressures persist, particularly for first-time buyers. In 2025, typical first-time buyers borrowed around £236,000 on properties valued at approximately £310,000, resulting in an average LTV of 78% and a deposit of 22%. In contrast, homemovers borrowed an average of £251,000 on homes worth about £466,000, with a lower average LTV of 58% and higher equity contributions of around 42%.

Adam French noted: “First-time buyers still face the steepest challenges, with many stretching to higher LTV deals given the need to save a considerable deposit. In contrast, remortgage borrowers, who typically hold far more equity and are unlikely to need to borrow more, stand to benefit most from easing rates.”

For landlords, this means that while some segments of the market may see increased activity, demand from first-time buyers may remain constrained, potentially sustaining rental demand among younger tenants or those unable to purchase.

Modest house price growth expected but affordability remains tight

French added that any expectations of substantial house price growth should be tempered by the fact that borrowing costs remain significantly above the ultra-low levels seen in the 2010s. “Lower rates remove a headwind rather than create a tailwind, making modest house price growth possible, but not guaranteeing it. Unless rates fall further or incomes rise faster than expected, the headroom for growth is likely to remain tight.”

This cautious outlook is important for landlords to consider when assessing potential capital appreciation and rental income growth over the next year.

Industry perspective on easing mortgage rates

Mary-Lou Press, President of NAEA Propertymark, welcomed the news of easing mortgage rates, stating: “Easing mortgage rates are welcome news after several years of affordability pressures and could support modest house price growth without significantly worsening buyer affordability.”

She emphasised that while lower rates may help first-time buyers offset rising prices, high deposits and stretched incomes remain major barriers. Home movers and remortgage borrowers, who typically hold more equity, are better positioned to benefit from the rate reductions.

Press concluded: “Lower rates remove a headwind rather than transform the market, and lasting improvements to affordability will depend on stronger wage growth and increased housing supply.”

Implications for landlords and property managers

The anticipated easing of mortgage rates in 2026 could lead to a more active housing market, with modest house price growth and potentially increased buyer confidence. For landlords, this environment may support sustained rental demand, particularly if first-time buyers continue to face affordability challenges that delay homeownership.

Additionally, remortgage borrowers benefiting from lower rates may have greater financial flexibility, which could influence decisions around property investment or portfolio expansion.

Trusted Landlord Association update

The Landlord Association (TLA) is launching a new Trusted Partners Hub in Q1 2026. This platform will feature verified and approved service providers selected to support landlords, tenants, and property management businesses. Legal, trades, insurance, financial, mortgage, tenant screening, and other service providers are invited to register their interest here: https://landlordassociation.org.uk/become-a-tla-service-partner/