By Clare Yates
3 min read
HSBC was first out of the blocks following December’s base rate cut. Barclays and Halifax have since joined in, fuelling hopes for more competition in the mortgage market in 2026.
The flurry of activity follows the Bank of England’s decision to cut the base rate to 3.75 per cent in December. While lenders had been slow to respond at the end of last year, the mood appears to have shifted as 2026 gets under way.
HSBC was the first big name to announce reductions, trimming rates across a range of residential and buy-to-let mortgages.
According to the Guardian, independent financial adviser David Stirling said that rivals were unlikely to sit on their hands. “Many of the other big lenders will feel the need to also cut to remain competitive, which could result in a rate war,” he said.
Three major lenders now cutting rates
That prediction already appears to be playing out. Halifax and Barclays have also announced mortgage rate cuts, with the cheapest fixed deals getting closer to the 3.5% mark.
According to This Is Money, Barclays is launching a two-year fixed mortgage at 3.57% for buyers with at least a 40% deposit, carrying an £899 product fee. For homeowners remortgaging with 25% equity, a two-year fix at 3.78% will be available, with a £999 fee.
This matches HSBC’s best two-year fixed rate of 3.78%, although that comes with a slightly higher £1,008 product fee.
Halifax has also confirmed it will reduce rates for home buyers by up to 0.16%, adding further pressure on rivals to sharpen their pricing.
What this means for borrowers
The timing of these rate cuts is significant. Around 1.8 million homeowners are expected to refinance their mortgages in 2026, many of them rolling off ultra-low fixed deals taken out before interest rates started rising at the end of 2021.
According to the Guardian, figures from Moneyfacts show the average rate on a two-year fixed residential mortgage were sitting at 4.83% in the first week of January, while the average two-year buy-to-let rate stood at 4.7%.
How low could rates go next?
City economists expect further base rate cuts this year. However, Nicholas Mendes, mortgage technical manager at broker John Charcol, explains that these upcoming cuts are already factored into fixed rate mortgages. “The cheapest two and five year fixes remain below bank rate, reflecting expectations of further cuts,” he said.
He added: “As a result, fixed mortgage rates are likely to fall by less than bank rate from here, and by the end of 2026 could once again be priced above bank rate as markets judge rates to be close to their long-term floor.”
But Aaron Strutt of broker Trinity Financial thinks that January’s mortgage rate cuts will keep the downward momentum coming. Speaking to This Is Money, he said: “Competition between the lenders to issue more mortgages is likely to be even stronger this year. Barclays is now offering six times salary mortgages with two-year fixes priced just over 3.5% which seems pretty generous when compared to the last few years. We can expect to see some more criteria easing and hopefully even cheaper fixed rates.”
With at least three major lenders already moving on rates and millions of borrowers facing remortgage decisions this year, the early signs suggest 2026 could be a far more competitive year for mortgage pricing than many had expected.