Mortgage News – June 2026
June has been a more settled month for the mortgage market, but there is still plenty for borrowers to keep an eye on.
The Bank of England held the Base Rate at 3.75%, inflation remained at 2.8%, mortgage approvals stayed resilient, and product choice improved. At the same time, markets are still pricing in the possibility of one further rate rise by the end of 2026, which shows that the path ahead is far from certain.
Here is Kerr & Watson’s June 2026 mortgage market update.
Bank Rate held at 3.75%
The Bank of England left the Base Rate unchanged at 3.75% in June.
This was expected by markets, but the tone from the Bank of England remained cautious. The vote was 7-2 in favour of holding rates, although one member of the committee was reported to be closer to voting for a rate rise than the rest of the majority.
The Bank of England is continuing to monitor inflation, wage growth, energy prices and global events, particularly developments linked to the Middle East and their possible impact on energy supply.
Although market expectations for interest rates have moderated in recent weeks, markets are still pricing in one quarter-point rise by the end of 2026, with Bank Rate then expected to settle around 4.00% for an extended period.
For borrowers, the key message is that the Base Rate has held steady, but the market is not yet confident that rates will fall quickly.
Why swap rates matter for mortgage pricing
One of the most important points for mortgage borrowers is that fixed mortgage rates are not only driven by the Bank of England Base Rate.
Fixed mortgage rates are heavily influenced by swap rates. These reflect market expectations for future interest rates and the cost of funding fixed-rate mortgage products.
This is why fixed mortgage rates can rise or fall even when the Bank of England has not changed Base Rate.
Earlier this year, global uncertainty and rising inflation expectations caused swap-rate volatility, which led to mortgage product withdrawals and rate increases from some lenders. More recently, swap-rate volatility has eased, helping lenders to bring some rates down and improve product availability.
That said, the market remains sensitive. If inflation expectations rise again, or if global events push energy prices higher, swap rates could move quickly and lenders may reprice products at short notice.
Mortgage product choice has improved
One of the more positive signs this month is the improvement in mortgage product availability.
Residential mortgage product choice has moved back above 7,000 options. This is a useful sign that lenders are becoming more comfortable offering a wider range of products again after a more unsettled period earlier in the year.
Average fixed rates have also eased. The average two-year fixed rate fell to 5.68%, while the average five-year fixed rate fell to 5.63%.
There has also been some improvement at higher loan-to-value levels. This is relevant for first-time buyers and those with smaller deposits, with more 90% and 95% LTV options available than in the previous month.
However, product shelf life remains relatively short. Mortgage products are still changing quickly, so borrowers should not assume that a rate available today will still be available in a few weeks.
Inflation remains above target
Inflation was unchanged at 2.8% in May.
This was lower than market expectations and below the Bank of England’s previous forecast, which is a positive development. However, inflation is still above the Bank of England’s 2% target.
Transport costs were one of the main upward pressures on inflation, partly due to higher air fares. Some of this may have been linked to the timing of Easter and school holidays rather than a clear sign of underlying inflation pressure.
Food price inflation helped move inflation in the other direction.
The Bank of England now expects inflation to be a little under 3% in the third quarter of 2026 and a little over 3.25% in the fourth quarter. This is lower than its previous forecast path, but still above target.
For mortgage pricing, inflation matters because it influences market expectations for future interest rates. Lower inflation can help support more stable mortgage rates, while stubborn inflation can keep pressure on swap rates and fixed-rate pricing.
The economy started 2026 stronger than expected
The UK economy made a stronger start to 2026 than the Bank of England expected.
GDP increased by 0.6% in the first quarter of the year. On the face of it, this is encouraging.
However, the Bank of England believes underlying growth may be closer to 0.2%, as business surveys have remained subdued. The Bank also expects growth to remain around that level in the second quarter.
This matters because growth of around 0.2% is below estimates of the UK’s longer-term trend growth rate. The Bank of England is watching whether emerging spare capacity in the economy helps reduce inflation pressure over time.
So, while the economy has not deteriorated rapidly, the underlying picture is still one of modest growth rather than a strong recovery.
Jobs and wage growth remain important
The labour market has held up better than some may have feared.
Payroll numbers are still on a downward trend, but the decline has been gradual. Unemployment fell to 4.9% in April, while wage growth was broadly unchanged and remains higher than inflation.
This means household spending power is holding up better than it would be if wages were falling behind inflation.
The Bank of England also noted that its contacts expect one-year-ahead wage growth of around 3.4%, which has remained stable since the start of the recent global uncertainty.
For mortgage borrowers, wage growth can support affordability, but lenders will still assess income, outgoings, commitments and overall financial stability carefully.
House prices remain broadly stable
The housing market continues to show resilience.
House prices fell for a third consecutive month in May according to Halifax, but the falls were small. Annual house price growth actually edged up to 0.5%.
This suggests the market is not surging, but it is also not showing signs of a major downturn.
There has also been some more positive sentiment around mortgage rates, with reports of notable cuts to mortgage pricing and hopes that easing geopolitical tension could help borrowers feel more confident about the market.
For buyers, this may create a more balanced environment. There may be more room for negotiation than during a faster-moving market, but demand has not disappeared.
Mortgage lending remains resilient
Mortgage activity has remained stronger than many expected.
The mortgage market in 2026 is tracking closely to 2025 levels. Gross lending reached £93bn over the year to April, compared with £92bn over the same period last year.
Mortgage approvals also remained resilient at 65,900 in April.
This shows that borrowers are still active, lenders are still lending, and the market is continuing to function despite higher borrowing costs than we saw during the low-rate years.
Important lender and product changes
There have been a lot of individual lender rate changes this month, but not every product update is worth highlighting.
The main market-wide point is that more lenders appear to be competing again. Product choice has improved, average fixed rates have eased, and some major lenders have made selected reductions.
The most relevant lender and product changes this month include:
- Nationwide reducing selected fixed rates by up to 0.28% across products for first-time buyers, home movers and remortgage customers.
- HSBC announcing reductions across selected residential and buy-to-let mortgage products, including options for first-time buyers, home movers, remortgage customers and existing borrowers.
- The Mortgage Works reducing selected buy-to-let and limited company buy-to-let rates, with changes across two, three and five-year fixed products.
These changes are encouraging, but they should be seen as signs of lender competition rather than a guarantee that all mortgage rates will continue to fall.
The best mortgage option still depends on the full picture, including loan-to-value, product fees, affordability, income structure, property type, credit profile and future plans.
Criteria and regulatory changes to watch
One of the most important wider developments is the FCA’s proposed Mortgage Rule Review.
The proposals are not live rule changes yet, but they could be important for the future of mortgage lending.
The FCA is looking at ways to improve access to mortgages for groups such as first-time buyers, older borrowers, self-employed applicants, people with variable income, foreign currency income and borrowers with historic credit issues.
The proposals also include potential changes around part interest-only lending and later life borrowing. This could include more flexibility around repayment strategies in certain circumstances, including possible links to retirement interest-only mortgages and lifetime mortgages.
For borrowers, this does not mean lending rules have changed overnight. However, it does show that regulators are looking at how mortgage rules can better reflect modern income patterns, affordability challenges and later life borrowing needs.
For advice-led firms like Kerr & Watson, this reinforces the value of looking beyond the headline rate and understanding the full criteria position.
What this means for borrowers
June has brought some encouraging signs, but the mortgage market remains finely balanced.
There is more product choice, average fixed rates have eased, and mortgage approvals remain resilient. Inflation has come in below expectations, but it is still above target. The economy has performed better than expected, but underlying growth remains modest. The labour market is holding up, but payroll numbers are still gradually falling.
For first-time buyers, improving product choice at higher loan-to-value levels is positive, although affordability remains a key challenge.
For home movers, a stable housing market and resilient approval levels may make planning easier, but monthly payments still need careful consideration.
For landlords, buy-to-let pricing has seen selected improvements, but rental stress testing, fees and lender criteria remain vital.
Kerr & Watson’s view
Our view is that June has been a more positive month for the mortgage market, but not a month to be complacent.
The improvement in product choice and selected lender rate reductions are welcome. The easing in average fixed rates is also encouraging.
However, the market is still being heavily influenced by swap rates, inflation expectations and global events. Mortgage rates can still move quickly, and products can still be withdrawn with limited notice.
At Kerr & Watson, we continue to monitor swap rates, lender pricing, product availability, affordability rules and criteria changes so clients can understand what is happening and what options may be available.
The right mortgage is not just about the lowest headline rate. It is about finding a suitable lender, understanding the total cost, checking the criteria, and making sure the mortgage fits your circumstances and future plans.
If you are buying, moving home, reviewing your mortgage or exploring more specialist borrowing options, Kerr & Watson can help you make sense of the market and find a suitable route forward.
