FINANCIAL experts have said mortgage rates could soon be sub-3.5% following this morning’s sharper than expected fall in inflation and that the property market looks set to start 2026 with a bang as a mortgage rate war intensifies.
But they urge savers, who will be facing lower rates, to act now. They also say the new rate environment could be looked upon favourably by the government as it seeks to shift people away from cash and into investments.
Daniel Hobbs, CEO at Rayleigh-based New Leaf Distribution, said: “The past week has been a huge one on the economic data front. GDP down, unemployment rising and now inflation playing ball means a rate cut tomorrow should be baked in.
“I’d expect a strong start to 2026 for the property market as lenders improve their pricing and transactions start moving in earnest after a quiet autumn period due to the Budget.”
Scott Gallacher, Director at Leicester-based Rowley Turton, urged savers to act but said borrowers may want to hold out: “Savings rates are likely to fall significantly in light of today’s lower inflation. Savvy savers who can afford to tie their money up should treat themselves to an early Christmas present by taking advantage of a fixed rate savings account now, before rates fall.
“Whereas borrowers might want to wait until rates fall before remortgaging or taking on extra debt.”
Mortgage melee
Andrew Montlake, CEO at London-based Coreco, a mortgage broker, said: “Borrowers have been gifted some early Christmas cheer with inflation better than expected and paving the way for a December rate cut. This will have the knock-on effect that mortgage rates look certain to decrease slightly and we will be in for a mortgage melee in the New Year.
“Savers, on the other hand, will be disheartened, but that is the very point of lower rates, to encourage more spending and investment, which is now crucial to address the issue of anaemic growth in the UK.”
Riz Malik, Director at Southend-on-Sea-based R3 Wealth, said: “Savers will be facing lower savings rates while borrowers will take delight as inflation falling to 3.2% makes a pre-Christmas cut highly likely.
“This also plays into the government’s hands in its efforts to move people from cash to longer term investing, as well as allowing them to take credit for lower borrowing costs. This is the Christmas miracle the government were praying for.”
Savers betrayed
But Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, said while borrowers will celebrate, savers will feel betrayed.
He added: “You save for a rainy day, only to be mugged off. As mortgage rates threaten sub-3.5% before Christmas, which will be cheered by borrowers, savers’ returns will be sacrificed.”
Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, said lower mortgage rates are likely incoming: “Today’s inflation data will turn heads among the UK’s lenders and more rate cuts in the days and weeks ahead now look almost certain. Sub-3.5% mortgage rates should be incoming, if not before Christmas then in the New Year. It could be a busy start to 2026.”
Shock absorber
Patricia McGirr, Founder at Burnley-based Repossession Rescue Network, worries savers will become the ‘shock absorber’ of lower mortgage rates.
She said: “Inflation falling sharply changes the mood overnight, but the impact will not be shared evenly. A rate cut now looks almost certain and a sub-3.5% headline rate before Christmas is possible for the lowest risk borrowers. That is genuine relief for some households coming off expensive deals.
“Savers, however, will feel this fast. Easy access and short-term savings rates are likely to be cut quicker and deeper than mortgage rates fall, as banks protect margins. Once again, savers become the shock absorber. They need to act now, because the window is already closing.”
Mortgage sales
Craig Fish, Director at London-based Lodestone Mortgages, said the mortgage sales could be in full swing in January: “With a rate cut from the Bank of England now odds on tomorrow, borrowers can expect the January mortgage sales to start with a bang — and some lenders are likely to break the 3.5% barrier sooner rather than later.
“But whilst this is good news for borrowers, savers will be penalised with lower rates, too. This isn’t really a time for celebration, as the government have broken the economy with their policies and things aren’t set to get better any time soon.”
Rohit Kohli, Director at Romsey-based The Mortgage Stop, was also sceptical of the economic climate.
He said: “Inflation’s down more than expected but we’re not out of the woods. Even if the Bank of England cuts the base rate, which is pretty much nailed on tomorrow, rising energy and business rates are still on the horizon.
“So if you’ve got a decent mortgage offer in front of you, it might be wise to lock it in now. It’s worth considering that the days of the fixed-rate mortgage reigning supreme might be fading and that this could be a moment to give trackers a thought. Either way, act sooner rather than later, because the landscape can shift quickly.”
Photo by Samuel Regan-Asante on Unsplash
