HSBC Leads UK Mortgage Rate Cuts in 2026 Following Bank of England Base Rate Reduction
HSBC has become the first major UK lender to cut mortgage rates in 2026, with new rates on residential and buy-to-let products effective from Monday 5 January 2026. This move follows the Bank of England's December reduction of the base rate to 3.75% and is expected to trigger similar cuts by rival lenders, raising the prospects of a mortgage rate price war during the year.
Approximately 1.8 million homeowners are forecast to refinance their mortgages in 2026, many transitioning from previously low fixed-rate deals. Data from Moneyfacts indicates the average 2-year fixed residential mortgage rate currently stands at 4.83%, while the average 2-year buy-to-let fixed rate is 4.7%. Borrowers currently on variable-rate deals will see repayments decrease immediately, whereas fixed-rate deals’ costs will depend on future rate outlooks and lender competition, with expectations that rates may remain above the base rate by the end of 2026.
City economists anticipate two further cuts to the Bank of England base rate in 2026; the Monetary Policy Committee was closely split 5-4 in December, with Governor Andrew Bailey switching to support a cut. UK Finance projects a decrease in demand for new home loans in 2026, while remortgaging activity is expected to rise.
In related housing market news, Nationwide reported a decline in December house prices, marking the weakest annual growth rate in 18 months.
