Question 1

Are interest rates going down?

Accepted Answer

Interest rates have been falling in recent weeks, with the lowest 2-year fixed rate mortgage available from our panel of over 100 lenders now 3.51%*. After the Bank of England’s base rate was cut in December 2025, mortgage lenders started to lower some fixed mortgage rates. We expect this rate-war to continue with mortgage rates drifting lower slowly through 2026 as further base rate cuts are anticipated later in the year. However, variable rates tied directly to the Bank of England base rate (like tracker mortgages) won’t change until the base rate itself is cut again. Savings rates have already begun to fall as the base rate reduction feeds through the market. Ensuring your money is in a savings account with an inflation-beating interest rate is vital to preserving the purchasing power of your money over time.

Question 2

Why are interest rates high?

Accepted Answer

Interest rates are higher than they have been in recent years, but are not as high as they were last year. If you need to move onto a new mortgage rate soon, or are looking at buying, you might look at current rates and despair that they are higher than the 1-2% deals offered during the COVID-19 pandemic. However, rates this low aren't common, and deals in the 3-4% range are much more normal. Right now, the lowest rate available from the 20,000 mortgages we advise on is 3.51%*. We could see mortgage rates drop even lower over 2026, but any declines are likely to be gradual. It's better to see what rates you could be offered now with a free Tembo plan, so you can understand your options without applying.

Question 3

Why is the base rate high?

Accepted Answer

By keeping the base rate high, the Bank of England has been trying to slow down consumer activity, which means companies can’t increase their prices so quickly. So far, this has been working, reducing inflation from the 11.1% peak in October 2022 to 3.4%. But inflation has recently increased, so although the Bank of England cut the base rate to 3.75% in December 2025, the next cut might not come until spring.

Question 4

How do falling interest rates impact first time buyers?

Accepted Answer

When interest rates rise, this makes mortgages more affordable as it decreases the amount of interest you'd pay each month, alongside paying off your mortgage loan. If you're a first-time buyer, lower interest rates might mean that you can afford to borrow more as your repayments aren't as expensive. Just remember that you need to be able to afford your mortgage, even if rates rise! If you're still saving towards your first home, falling interest rates make it even more important to save into an account with a competitive interest rate, so you can earn as much interest on your savings as possible.

Question 5

How do rising interest rates impact homeowners?

Accepted Answer

If you already own a home, the falling interest rates will only impact you if you are coming to the end of your current fixed rate deal and are looking to remortgage, or you are on a variable rate. Of the 1.8 million households remortgaging in 2026, those coming off 2-year fixes taken in 2024 could see some improvement, while those leaving 5-year fixes when rates were at historic lows will likely still face higher repayments, even after recent mortgage rate cuts. This is why finding the best deal possible for you is vital, as it can help mitigate the potential rise in mortgage costs.

Are interest rates going down, and what does it mean for you?

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