Market Update February 2026

The latest inflation data has provided some encouragement for the mortgage market, with CPI inflation falling to 3.0%, continuing the downward trend seen over recent months.

The reduction was driven largely by lower fuel and transport costs alongside easing food price pressures. However, underlying inflation  particularly within the services sector remains more persistent, which is an area the Bank of England continues to monitor closely.

As a result, the Bank of England is maintaining a cautious stance. While base rate has stabilised, the conversation is increasingly shifting from whether rates have peaked to when reductions may begin. If inflation continues to move towards the 2% target, markets are expecting the potential for cuts later in the year rather than immediately.

For mortgage borrowers, the more immediate impact is typically seen in swap rates, which influence fixed mortgage pricing. When inflation expectations improve, swap rates tend to soften, giving lenders greater flexibility when setting fixed-rate products.

This does not always lead to instant mortgage rate reductions, but it usually creates a more competitive lending environment. We are already seeing lenders becoming more active on both pricing and criteria, and provided inflation continues to moderate, conditions for borrowers should gradually improve as the year progresses.