London, May 21, 2026 – UK mortgage lenders are once again moving in opposite directions, reflecting ongoing volatility in funding costs rather than a response to the Bank of England's steady base rate. NatWest will raise selected mortgage rates by up to 24 basis points from May 21, while Barclays and Santander are cutting some high loan-to-value (LTV) products. This divergence comes as a significant refinancing wave begins, with UK Finance projecting that 1.8 million fixed-rate mortgages will expire in 2026, forcing households to decide whether to lock in current deals or gamble on future rate movements.
The Bank of England base rate remains at 3.75%, with the next policy decision expected on June 18. The central bank has indicated that higher rates typically increase mortgage and loan payments, squeezing household spending capacity. April's inflation data provided some relief, with the Consumer Prices Index rising 2.8% year-on-year, down from 3.3% in March. Core CPI, excluding energy, food, alcohol, and tobacco, slowed to 2.5%. However, markets remain unsettled.
Lender-specific moves
NatWest's adjustments include raising its fee-free two-year fixed deal at 90% LTV to 5.56% from 5.33%, and a similar deal at 95% LTV to 5.70%. These changes take effect from May 21. In contrast, Barclays has cut rates on some high-LTV products, with its fee-free two-year fixed deal at 95% LTV now at 5.50%. Santander announced it will lower certain first-time buyer rates at 85%, 90%, and 95% LTV by up to 0.23% from May 22, along with reductions on some homemover and remortgage rates.
According to Rightmove's tracker as of May 20, the average two-year fixed rate stands at 5.14%, and the five-year fix at 5.15%, both just 0.02 percentage points lower than a week earlier. Matt Smith at Rightmove noted that lenders are holding back, with swap rates—used to price fixed mortgages—remaining sensitive to geopolitical risks.
Market outlook and expert views
David Hollingworth, associate director at L&C Mortgages, described April's inflation dip as a positive sign but warned that borrowers cannot afford to relax. L&C's tracker shows the average best two-year remortgage fixed rate among the top 10 lenders at 4.78%, the lowest since late March. However, Hollingworth noted that fewer rate cuts are coming through. Caitlyn Eastell at Moneyfactscompare.co.uk described the mortgage market as still highly reactive to shocks, cautioning that borrowers rolling off five-year ultra-low fixes could see repayments jump by over £5,400 annually.
Bank of England Governor Andrew Bailey told lawmakers that higher market rates and rising mortgage costs have tightened financial conditions, giving the central bank more time to assess the impact of the Iran war on the economy. Markets are still pricing in at least two quarter-point rate hikes this year, according to Reuters.
Housing market data
UK housing data remains soft, with average house prices flat at £268,000 in the year to March, compared to a 1.7% rise in February. Private rents, however, increased by 3.5% in the year to April. While flat prices may help buyers on the margin, costly loans remain the primary affordability challenge. Mortgage approvals hit a four-month high in March, with 63,531 house purchase loans signed off, indicating that demand has not dropped. However, Rob Wood at Pantheon Macroeconomics expects higher borrowing costs may limit house price inflation to just 1.0% by the fourth quarter.
The outlook remains uncertain. If energy prices fall and markets reduce rate hike bets for the Bank of England, lenders may continue cutting rates. Conversely, if swap rates stay elevated or another inflation shock emerges, recent cuts could quickly reverse. Tracker mortgages currently appear cheaper upfront as they follow Bank Rate, but they expose borrowers to any upward moves.
