Mortgage rates are expected to fall further in January after the Bank of England cut the base rate from 4% to 3.75%, prompting lenders to prepare for a highly competitive start to the year.
Brokers say sub-3.5% deals could emerge soon, with some predicting rates below 3% by spring.
Simon Gammon, of Knight Frank said: “Lenders have been trimming mortgage rates for several weeks, but Thursday’s decision adds momentum to what we expect to be a highly competitive January.
"With new lending targets in place, lenders are likely to undercut one another to win that early-year business. It’s not impossible that we see two-year fixed rates below 3% by spring.”
Tracker deals are also expected to fall below 4% as further base rate cuts are anticipated in 2026.
Mark Harris, of SPF Private Clients, said the outlook would support confidence: “This will provide a welcome shot in the arm for the housing market which suffered from pre-Budget speculation over property taxes that on the whole were not as bad as many feared.”