Financial analysts are forecasting a significant upswing in the UK mortgage sector for 2026, driven by fierce lender competition and a record number of available deals. New data reveals that options for borrowers, particularly those stepping onto the property ladder for the first time, have surged to levels not seen in nearly two decades.
Record Product Choice and Falling Rates Fuel Optimism
According to the latest report from financial information service Moneyfacts, the overall selection of mortgage products has climbed to 7,158 options. This marks a monthly increase and a rise of 650 compared to the previous year, representing the highest availability since October 2007. Concurrently, mortgage rates have been on a downward trajectory, a trend expected to persist throughout the year.
The average two-year fixed mortgage rate has now fallen to 4.44 per cent, dipping below 5 per cent in August 2025 for the first time since the market turmoil following the September 2022 mini-budget. Borrowers received an additional boost in December when the base rate was cut from 4 per cent to 3.75 per cent, reducing costs for those on tracker deals.
First-Time Buyers Find More Support
The market expansion is especially beneficial for first-time buyers. The report highlights a notable increase in deals requiring low deposits, with mortgages at 90 and 95 per cent loan-to-value (LTV) sitting at near 18-year highs. Lenders have relaxed their requirements, offering more support to this crucial segment of the market.
Further regulatory changes are paving the way for easier access. In July 2025, regulators allowed lenders to offer more mortgages at higher loan-to-income (LTI) levels, enabling buyers to borrow larger sums. The Financial Conduct Authority (FCA) is also consulting on plans to simplify mortgage rules for first-time buyers and the self-employed, with changes anticipated later in 2026.
Expert Calls for Continued Innovation
Rachel Springall, a finance expert at Moneyfacts, commented on the positive outlook. "Borrowers and lenders will be in a state of optimism, off the back of a positive 12 months for the mortgage market in 2025," she said. "Mortgage rates are lower year-on-year, and the choice of deals is abundant. The relaxation in stress testing and expectations for further rate cuts will help ease the affordability constraints on borrowers."
However, Springall noted that "more progress to support underserved buyers would be welcomed amid a lack of affordable housing." She pointed to the FCA's 'Roadmap' for the mortgage market, which will review key themes such as expanding options for new buyers and modernising regulation, stating that "innovation is set to become a key talking point this year."
With expectations high for a booming market, the combination of increased product choice, competitive rates, and regulatory evolution signals a potentially transformative year for the UK housing finance landscape.
