Mortgage lenders have entered 2026 in an increasingly competitive mood, with a sharp expansion in product choice and a steady easing in borrowing costs setting the tone for what many in the industry expect to be a far busier year for home loans.
New figures from Moneyfacts show the total number of mortgage deals on the market has climbed to 7,158, up by 650 compared with a year ago and the highest since October 2007.
Availability has improved most markedly for borrowers with small deposits, with products at 90% and 95% loan-to-value now close to 18-year highs.
Lower rates have reinforced that trend. The average two-year fixed mortgage rate has fallen to 4.83% at the start of January, while five-year fixes are holding at 4.91%.
FALLING RATES
Overall, the average mortgage rate is now 4.87%, more than half a percentage point lower than a year earlier. Tracker rates have dropped even faster, reflecting cuts to the Bank of England base rate, with the typical two-year tracker now at 4.44%.
The increased competition has also seen products staying on lenders’ shelves for longer, with the average mortgage now available for 21 days, giving borrowers more time to compare deals.
For homeowners coming to the end of a fixed term, the incentive to remortgage has strengthened. The average standard variable rate has eased to 7.25% but remains well above most new fixed deals, creating a wide gap between what many borrowers pay when they revert and what is available in the open market.
UPBEAT MOOD
Rachel Springall, finance expert at Moneyfacts, says lenders and borrowers alike are entering the year in a far more upbeat mood after what she described as “a positive 12 months” for the mortgage market.
She says expectations were high for a much more active 2026, driven by lower rates and an “abundant” choice of products.
Springall adds that the relaxation of affordability stress tests and the prospect of further base rate cuts should help ease pressure on buyers, particularly first-time purchasers, where low-deposit deals are now at their highest levels for almost 18 years.
Innovation and regulatory reform, she adds, are also set to feature heavily on the Financial Conduct Authority’s agenda as it looks to modernise the market.
With around 1.8 million fixed-rate mortgages due to end this year and UK Finance forecasting a 10% rise in external remortgaging, lenders are likely to keep pricing keen as they compete for business in what could be the most dynamic mortgage market for nearly two decades.
FIRST-TIME BUYER BOOST
Mary-Lou Press, President of NAEA Propertymark (National Association of Estate Agents), says: “Falling mortgage rates and a growing range of products are welcome signs for the property market in 2026, particularly for first-time buyers accessing higher loan-to-value deals.
“However, improved lending conditions must be matched by increased housing supply to ensure more people can turn affordability gains into homeownership.
“With many fixed-rate deals ending this year, professional advice will be vital in helping households navigate their options and maintain confidence in the market.”
