Falling Inflation and Rising Confidence Signal a Brighter Outlook for Mortgage Borrowers in 2026

Latest inflation drop to 3% could mean a bank base rate cut next month says Enzo Mora CEO and founder of The Mortgage Brain

As inflation edges closer to the 2% target required by the government, it’s good news for borrowers who could see the first bank rate cut of 2026 in March. This comes on the back of new research from Moneyfacts showing mortgage affordability is set to improve significantly in 2026 with average mortgage payments falling to around 41% of average gross salaries, a level last seen in 2021. It’s expected that average mortgage rates will stabilise between 4.25% and 4.5% as house price growth slows and wages rise.

Confidence is rising

Rightmove’s monthly confidence tracker shows that net confidence among buyers and sellers in January returned to its highest level since September 2025. Many buyers who put a move on hold at the end of last year are now keen to take advantage of lower borrowing costs and increased supply of property for sale. The latest Residential Market Survey from RICS suggests market conditions may be starting to turn a corner with new buyer enquiries increasing and a growing conviction from its members that a recovery in sales volumes will gather momentum over the year ahead. Homeowner mortgages in arrears fell by 4% in Q3 2025 says UK Finance and the number of properties taken into possession compared to the previous quarter decreased by 13%. BTL mortgages in arrears also fell, down nine per cent to 9,520 compared to the previous quarter. Mortgage lenders continue to offer tailored support to anyone struggling with their mortgage payments.

First-time buyers benefits

ONS figures show that the average monthly UK private rent was £1,367 per month in January, £46 or 3.5% higher than 12 months ago. As rents rise, affordability for first time buyers is improving via a number of encouraging ways. Nationwide’s Helping Hand scheme allows lending up to six times income, up to 95% LTV on a 5 year fixed rate and up to 90% LTV on a 10 year fixed rate. This has now been extended to both new and existing customers who are moving home or remortgaging up to 95% LTV. Nationwide will need a minimum annual salary of £75,000 for sole applicants or £100,000 for joint applicants.

Helping hands easing

Barclays’ latest Property Insights report reveals on average, Gen Z savers (aged late 20s to early 30s) have saved £19,442, excluding financial assistance or inheritance, compared to £25,760 among all hopeful buyers. Gen Z adults expect to add a further £8,998 to their deposit pot throughout 2026, compared to a national average of £11,023. While the Bank of Mum and Dad remains influential supporting a third (34 per cent) of recent Gen Z buyers, perceptions around the necessity of support from family or friends appear to be easing, with four in 10 (43 per cent) saying inheritance or financial assistance is now essential, compared to 63 per cent at the start of 2025.

Get engaged!

New research from the Building Societies Association shows that first time buyers could be much closer to owning a home than they realise as 47% of people who want to buy their own home have never spoken to a lender or mortgage broker to check what their options are, instead assuming they wouldn’t be able to buy a property. Encouragingly, mortgage professionals are seen as the most trusted source of advice with 53% saying a mortgage adviser is the best source of information. If you know someone who would like to buy but thinks otherwise, please point them in our direction, we will be delighted to discuss all options on the table.