Interest Rates in 2026: What Landlords Can Expect

MFB reflects on how buy to let mortgage rates have changed over the last year and sets out the predictions for 2026 to help property investors prepare. 

Interest rates are the most prominent influencer of property investment trends and mortgage market sentiment. Over the last few years, inflation, the Base Rate, political policies, and geopolitical uncertainty have all triggered significant fluctuations to buy to let mortgage rates. 

As we approach the new year, looking back on how far we’ve come and assessing where we are now can help you better understand the predictions for mortgage rates in 2026. 

A look back at buy to let mortgage rates 

According to data from Moneyfacts, in June 2024, the average 5-year fixed mortgage rate was 5.55% and the average 5-year SWAP rate was 3.928%. 

At the time, there was cautious optimism that both the Bank of England Base Rate (BBR) and inflation figures would fall. The rates, slightly higher than those currently available, reflect the pressure on lenders to price in risk and maintain their profit margins in the fluctuating market. Consequently, despite the rising rents and softer affordability assessments, landlords were left feeling the pinch of tighter borrowing costs. 

Regardless, the market (and landlords) remained resilient. Furthermore, lenders continued to expand product ranges and criteria to better support landlords in the somewhat tumultuous market. 

Current mortgage rate pricing 

The same Moneyfacts data shows that, in June 2025, the average 5-year fixed rate was 5.29%, and the 5-year SWAP rate had dropped to 3.615%. 

This may seem like an insignificant drop in pricing; however, the difference in the total cost of a loan across a mortgage term is much more noticeable. For example: 

Source: Moneyfacts 

Furthermore, rents have increased by 6% since January 2024 (ONS), which means: 

If you had purchased a buy to let in January 2024 worth £350,000 and borrowed £250,000 from your lender, your monthly interest cost would have been £1,147, and your rent would have been £1,458 (using average yield data at the time), giving you a monthly surplus of £311. 

Applying those figures to today’s pricing, your monthly interest cost would be £1,014 and your rent would be £1,587, giving you a surplus of £573.

Forecasts expect inflation to continue hovering above 3% for the remainder of 2025. However, the Monetary Policy Committee (MPC) suggests it could fall to between 2.1% and 2.6% in 2026, bringing it closer to the government’s 2% target.  

The mortgage market in 2026

The inflation forecasts are positive; however, we don’t expect to see any significant changes to mortgage rate pricing in the near future. For rates to come down, we need the projection for BBR to fall faster or further over the next 5 years. 

The challenge lies in the fact that the capital markets have already priced inflation predictions into SWAP rates. Therefore, unless the inflation rate falls faster than expected, allowing BBR to reduce quickly, there is no reason for fixed rates to change from where they are now. 

Predicting 2026 buy to let mortgage rates 

By the end of 2026, we predict that the average 5-year fixed rate will have settled at around 4.5%. It’s important to note that this figure reflects the total cost of borrowing, including arrangement fees and other mortgage costs, and not just the headline interest rate. 

We’ve been cautiously optimistic here. The prediction assumes that inflation and the BBR will fall as expected, with mortgage lenders adjusting their pricing accordingly. 

Of course, there are several external factors that could impact mortgage rate pricing over the next year, including: 

• Rachel Reeves’ upcoming Autumn Budget
• Political shifts
• Ongoing geopolitical instability 
• Unexpected economic factors

How lenders are preparing for 2026 

It’s a common misconception that higher interest rates mean lenders have less appetite to lend to landlords. In reality, we’ve seen lenders doubling down on efforts to be competitive and help more borrowers access funding. 

Many lenders are: 

• Adapting their policies to be more inclusive and flexible
• Improving their systems and processes to speed up applications and reduce declines
• Enhancing their service levels to ensure a smoother experience for landlords 

In fact, it’s clearer than ever that lenders understand the pressures landlords face and are finding new ways to help. 

This is evident in the evolution of Limited Company pricing and offerings over the years. Historically, Limited Company mortgage rates were 1-2% more expensive than rates for borrowers investing in their personal name. Now, the pricing difference is minimal. 

Analysis of Companies House data (completed by Hamptons) revealed that 5,312 new Limited Companies were established for buy to let purposes last September. That’s 28% more than in any previous September on record. 

At the time of writing, there is no new data for 2025. However, with the tax benefits of incorporating a buy to let portfolio, we expect landlords to continue favouring Limited Company investment.  

Please seek professional tax advice before making any property investment decisions. 

Getting ready for 2026

It’s no surprise that interest rates remain such a key metric for landlords, and 2026 will be no different. Many landlords are still delaying their refinance plans in hopes of accessing lower mortgage rates. 

The Renters’ Rights Bill will define the buy to let market in 2026. Therefore, it’s essential that you stay informed and work closely with brokers and lenders to navigate the changing market. Rates will hold steady before they fall, and there are plenty of property finance opportunities available now to give you some stability through the market’s transition. 

Yes, we’re unlikely to see any drastic rate drops in the short-term, but the long-term outlook is improving. The mortgage market is entering a new period of stability at a time when landlords are going to need it most.

Mortgage Finance Brokers Limited is authorised and regulated by the Financial Conduct Authority (No. 313537) to transact regulated mortgages. We are a credit broker, not a lender. We work with the whole of market in sourcing a lender for you; we may receive a commission from the lender, and this amount varies between lenders. The FCA does not regulate some investment mortgage contracts. Mortgage Finance Brokers Limited is a founding member of the National Association of Commercial Finance Brokers, the body that promotes best practice within the commercial finance industry. Telephone calls may be monitored or recorded for training purposes.