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Mortgage rates in the UK fell in May 2026, after lenders had started to raise rates in response to the conflict in the Middle East a month earlier. In May 2026, the average two-year fixed mortgage rate decreased by ** basis points to ****Ìýpercent. Rates for 10-year fixed-rate mortgages reached **** percent.

Mortgage rates surged at an unprecedented pace in 2022, with the average 10-year fixed rate doubling between March and December of that year. In response to mounting inflation, the Bank of England implemented a series of rate hikes, pushing borrowing costs steadily higher. As financing becomes more expensive, housing demand has cooled, weighing on market sentiment and slowing house price growth.Ìý

How have the mortgage hikes affected the market?Ìý

After surging in 2021, the number of residential properties sold fell significantly in 2023, dipping to just above *** million transactions. This contraction in activity also dampened mortgage lending. Between the first quarter of 2023 and the first quarter of 2024, theÌývalue of new mortgage loans declined year-on-year for five consecutive quarters. Even as rates eased modestly in 2024 and housing activity picked up slightly, volumes remained well below the highs recorded in 2021.

How are higher mortgages impacting homebuyers?Ìý

For homeowners, the impact is being felt most acutely as fixed-rate deals expire. Mortgage terms in the UK typically range from two to ten years, and many borrowers who locked in historically low rates are now facing significantly higher repayments when refinancing. By the end of 2026, an estimated five million homeowners will see their mortgage deals expire. Roughly two million of these loans are projected to experience a monthly payment increase of up to *** British pounds by 2026, putting additional pressure on household budgets and constraining affordability across the market.