December 23, 2025

Interest rates in 2026: What can landlords expect?

The Bank of England spent most of 2025 cutting interest rates as inflation and the economy stabilised. Following the November 2025 Budget, financial analysts are speculating that further cuts to the base rate of interest are coming in 2026. Inflation is coming down, and the financial markets backed the Chancellor of the Exchequer’s measures in large part.

‍

That stability has led many to look ahead to 2026 with more confidence. What can landlords expect in the year ahead?

‍

What is the state of play at the end of 2025?

‍

The Bank of England’s Monetary Policy Committee chose to hold the base rate before the Budget by a narrow 5-4 vote. Following the Budget, they are widely expected to vote for a 0.25% cut this December before the end of the year. That would leave the rate at 3.75% at the end of 2025.

‍

Inflation has fallen to 3.8% and many economists believe that the peak has been passed. Andrew Bailey, the Bank of England governor, said at the previous meeting that he wanted to “wait and see” whether it would fall further before voting for a cut. Now it has fallen, and the Budget has delivered the conditions for further cuts, so we are likely to see another cut.

‍

But what about 2026?

‍

Will there be further interest cuts in 2026?

‍

The good news is set to continue in 2026. The Office for Budget Responsibility has concluded that Budget measures will deliver a fall in inflation of at least 0.4% next year, which is exactly what the Bank of England wants to see.

‍

Not only is this the biggest near-term reduction in inflation due to government policy the OBR has ever forecast, but it might also not be the whole story. If the economy outperforms estimates or the global economic situation improves, inflation might fall even further.

‍

Overall, inflation is expected to fall to 2.5% by the end of next year, and then reach the Bank’s target of 2% over the course of 2027. With that in mind, the markets have priced in a further cut in the first half of next year, and then one more by the end of 2026. If that happens, the base rate could fall to 3.25%. ‍

‍

What would two interest rate cuts in 2026 mean for landlords?

‍

The most important impact will be on the cost of mortgages. Firstly, if you have a tracker mortgage on a current property, your repayments will fall each time the base rate is cut. That should cut your costs and increase your profits immediately.

‍

Secondly, the price of taking out a new mortgage is already falling. Lenders have ‘priced in’ at least one further cut in 2026 and consider two cuts likely. Their rates are already moving to reflect this, so any landlord considering a new mortgage will already begin to see the positive effects of falling inflation.

‍

That could also apply if you want to remortgage an existing property to release equity or to change your repayment plan. If rates come down, it could be possible to save yourself some money through remortgaging, but please make sure to speak to an independent mortgage advisor before doing so.

‍

Finally, if inflation falls faster than expected and the base rate is cut more aggressively, mortgages will continue getting cheaper in the future. This is always possible if economic conditions are kind.

‍

Need a professional lettings and property management agent for your property? Contact our team today to get started!

Arrange a call with our team today.

Contact us today regarding all property management and lettings enquires.

0161 388 7848

contact@northbankresidential.com

Contact us today

We are here to help you navigate your property journey. Enquire below and one of our Property Managers will be in contact to discuss.

Thank you! Your submission has been received!

Oops! Something went wrong while submitting the form.