Mortgages 2026 - Why Rates Feel Stuck and Why They Still Hurt

27th January 2026

By 2026, the UK mortgage market has entered an uncomfortable new phase. The chaos of rapidly rising interest rates has eased, but relief has not fully arrived. Mortgage rates are no longer surging. Yet for millions of households, they remain stubbornly high and painfully unaffordable. The result is a housing market stuck between past expectations and a harsher financial reality.

Rates are no longer rising but they aren't falling much either

After peaking in 2023-24, average mortgage rates have gradually edged down. Typical two- and five-year fixed deals now sit around the mid-to-high 4% range. That is a clear improvement from the worst of the crisis, but in recent months rates have barely moved. Small cuts by lenders have been offset by occasional increases, leaving the market broadly flat.

This "stuck" feeling reflects uncertainty about inflation and the pace of future Bank of England base-rate cuts. Lenders are cautious, pricing mortgages for a world where interest rates may fall slowly — but not return to the ultra-low levels of the past decade.

By historical standards, rates aren't extreme

Viewed over the long term, today’s mortgage rates are not unusually high. For much of the late 20th century, homeowners routinely paid 6-10%, and sometimes far more. Even in the early 2000s, mortgage rates around 5–7% were considered normal.

The real anomaly was the period from roughly 2010 to 2021, when rates fell to 1–2% and, in some cases, below. That era of ultra-cheap borrowing was the product of emergency monetary policy following the financial crisis and the pandemic. It was never meant to be permanent.

In that sense, today’s mortgage rates represent a return to something closer to the historical average.

So why does remortgaging feel so unaffordable?

The pain comes not from the rate itself, but from what households are borrowing.

House prices have risen far faster than incomes over the past two decades. As a result, modern mortgages are dramatically larger than those of previous generations. A "normal" interest rate applied to an abnormally large loan produces eye-watering monthly payments.

For many households, the shock has been sudden. Homeowners coming off fixed deals of 1–2% are being pushed onto rates closer to 4–5%. Even if that level is historically ordinary, the jump in monthly repayments can be hundreds of pounds.

This cliff-edge effect explains why remortgaging feels brutal, even as headline rates stabilise.

The affordability problem hasn’t gone away

Mortgage affordability in 2026 remains tight, particularly for first-time buyers and those remortgaging after ultra-low deals expire. Payments often consume a much larger share of household income than they did a decade ago, even if rates themselves are not extreme by historical standards.

Fees have also risen in cash terms. Arrangement fees of £1,000 or more are common, adding to the overall cost of securing a new deal. Combined with higher house prices and stretched incomes, this keeps many households under pressure.

What happens next?

Most forecasts suggest mortgage rates may drift lower over time, especially if inflation continues to ease and the Bank of England cuts base rates further. But few expect a return to the sub-2% era. The market appears to be settling into a “new normal” where borrowing costs are structurally higher than they were in the 2010s.

That means affordability is unlikely to improve dramatically unless wages rise faster, house prices cool, or lending rules change. Without those shifts, even modest mortgage rates will continue to feel expensive.

The bigger picture

The UK’s housing market was built on the assumption that cheap money would last indefinitely. That assumption has now been exposed. Mortgage rates in 2026 are not historically high — but they are high relative to the size of modern mortgages and the incomes that support them.

In short, the mortgage crisis is no longer about runaway rates. It is about a housing system struggling to function in a world where money once again has a meaningful cost.