London Mortgage Update: July 2026

Where we are: base rate held, but the direction is clear

The Bank of England's Monetary Policy Committee held the base rate at 4.25% at its June meeting, as most economists expected. Inflation has continued its gradual descent, with CPI sitting just above the 2% target, and wage growth, while still elevated, is no longer the concern it was through 2023 and 2024.

In my view, the MPC is in wait-and-see mode. The committee is nervous about declaring victory on inflation too early, particularly with services inflation still stickier than they would like. That said, the market is pricing in one further cut before the end of 2026, most likely at the November meeting. A cut to 4.0% by year end would be a meaningful psychological moment, even if it does not translate immediately into dramatically lower fixed mortgage rates.

It is worth reminding clients that swap rates, the underlying funding costs that actually determine fixed mortgage pricing, have already moved ahead of base rate changes. The market had largely priced in the November cut before summer. This is why some lenders are already offering 5-year fixes well below 4.5%, even while the base rate sits at 4.25%.

Lender activity: sub-4% rates arriving for the right borrower

This month has been notable for genuine movement in the lending market. I am seeing a cluster of lenders pushing 5-year fixed rates below 4% for borrowers with a 40% deposit (60% loan-to-value). These are not headline-grabbing deals with big arrangement fees designed to mislead comparison sites: they are credible, genuinely competitive products.

At 60% LTV, the best 5-year fixes are now in the 3.85%–3.95% range from a handful of lenders, including some that are only available through broker. The 75% LTV tier, which covers a much larger slice of London homeowners, has also moved, with the best 5-year fixes now sitting around 4.1%–4.3%.

2-year fixed rates remain slightly higher than 5-year equivalents at most LTV bands, reflecting the market's expectation that rates will continue falling. At 75% LTV, competitive 2-year fixes are in the 4.3%–4.5% range. Whether you should fix for 2 or 5 years right now depends heavily on your own circumstances, which I discuss further below.

For borrowers at 85%–90% LTV, the picture is less dramatic but has still improved. Mainstream lenders are pricing 5-year fixes in the 4.6%–5.0% range at these higher LTV levels. High-street lenders are competing hard here, particularly for first-time buyers, and I am seeing some good deals emerge from lenders who were not particularly competitive at 90% LTV six months ago.

London market: spring extended into summer

The London spring market arrived a few weeks late in 2026 but has run longer than usual. I am seeing a higher-than-typical volume of clients instructing in June and early July, which is not normal for a market that usually quietens in late June ahead of the school holidays.

The reasons are not hard to understand. Buyers who were hesitating in late 2025 and early 2026, watching to see whether rates would fall further, have started to accept that sub-3% is not coming back any time soon. The combination of improving affordability and reasonable stock levels has given confidence to those who had been sitting on the fence.

On the price side, I am seeing a clear divergence between prime and outer London. Prime central London, particularly in the SW and W postcodes, has been supported by international demand returning more strongly than expected following a period of sterling weakness. Some clients are reporting competitive bidding situations on well-presented properties in sought-after locations. Outer London, by contrast, is much more rational. Buyers have negotiating room in areas like Bexley, Havering, and parts of Enfield, and I am regularly seeing clients achieving below asking price without losing their property.

From a mortgage perspective, this divergence matters. A £1.5 million purchase in Fulham requires a very different approach to a £350,000 purchase in Romford. The lender selection, product type, and income assessment criteria differ substantially, and an independent broker with London experience can navigate those differences.

For first-time buyers: now is a better environment than it looks

I hear a lot of frustration from first-time buyers who feel the market has moved against them. The reality is more nuanced. Yes, rates are higher than they were in 2020 and 2021. But affordability at 90% LTV has genuinely improved over the past twelve months, and the London market is offering more choice than it has for several years in the sub-£500,000 range.

On a £350,000 purchase with a 10% deposit (£35,000), a 5-year fix at around 4.7% gives a monthly repayment of approximately £1,750 on a 25-year repayment mortgage. That is a real number and it requires careful budgeting. But it is not a barrier for two professional earners in London, and I am regularly helping solo buyers on good incomes make it work in the outer boroughs.

One thing I am emphasising to first-time buyers right now: the Lifetime ISA bonus is still one of the most effective financial tools available to you, and it is chronically underused. If you are under 40 and have not opened one, do it today. The 25% government bonus on up to £4,000 per year is free money. If your LISA has been open for over 12 months, you can use it on any purchase up to £450,000. For London buyers, that rules out a lot of properties, but in the outer boroughs and Home Counties there is still plenty of choice within that threshold.

The other shift I am seeing is lenders becoming more thoughtful about professional income. Several lenders have quietly improved their income multiples for applicants in specific professions, doctors, engineers, chartered accountants, solicitors. If you are in a professional occupation and have been told you cannot borrow enough to buy in your preferred area, it is worth having that conversation with a broker who knows which lenders are currently most generous for your income type.

For those coming off fixed rates in 2026: act, do not wait

There are still a significant number of borrowers who fixed for 5 years in 2021 at rates between 1.5% and 2.5%, and those deals are now rolling off. If you are in that group and your fix ends in 2026, the payment increase is going to be real regardless of what you do. But there is a meaningful difference between remortgaging proactively and ending up on your lender's Standard Variable Rate.

SVRs at major lenders are currently running between 7% and 8.5%. On a £300,000 outstanding mortgage, that is roughly £500–£700 per month more than a competitive new 5-year fix. Every month you sit on the SVR is money you cannot recover.

I am currently working with a number of clients who fixed in 2021 and whose deals expire in the autumn. We are locking in new deals now, up to 6 months ahead of expiry, at rates that will come into effect on the day the old deal ends. There is no ERC, no gap on the SVR, and you have certainty about what your payments will be from September or October. If your deal ends before December, you should be in conversation with a broker right now, not next month.

On the 2-year versus 5-year question for this group: my honest view is that 5-year fixes look better value for most people in this situation. The rate differential between 2 and 5-year products has narrowed considerably, and 5 years of payment certainty has real value when you have just experienced 12 months of market uncertainty. That said, if you are planning to sell or move within 3 years, a 2-year fix or a tracker may be more appropriate. The right answer depends on your plans, not just the rate sheet.

Buy-to-let: pressure continues, but opportunities remain

The buy-to-let market in London continues to contract at the margins. Smaller landlords with one or two properties, particularly those with mortgages at 75%+ LTV and thin yield margins, are still exiting. The combination of Section 24 tax treatment, the EPC requirement uncertainty, and higher mortgage costs has made the economics difficult for leveraged personal landlords.

However, for well-structured portfolios, particularly limited company landlords in London with strong yields, the market is more attractive than media coverage suggests. Rental demand in London remains exceptionally strong. Average rents in most London boroughs are at record highs. For a landlord with a property at 60% LTV in a high-demand postcode, the income-to-cost ratio is workable, especially as BTL mortgage rates at 60% LTV have also started to show some improvement.

I am seeing more clients exploring the limited company SPV route for new acquisitions. The tax arithmetic for higher-rate taxpayers has become compelling enough that the setup cost and slightly higher mortgage rate is justified in most scenarios. If you are a personal landlord considering a new purchase, please get tax advice before you proceed on either basis. The decision has long-term consequences and generic guidance is not sufficient.

One practical BTL note for July: a number of lenders have updated their rental stress test calculations following the base rate hold. The notional stress rate used by most lenders remains at 5.5%, and the 125% coverage ratio for basic-rate taxpayers still applies. The key variable is finding the lender whose specific stress test your property passes. Rental values across most of London are strong enough that this is usually achievable, but it requires matching the right lender to the right property.

What to watch in August

August is typically quieter for new mortgage applications, but it is a good month to prepare. The next Bank of England meeting is in August, and while I do not expect a cut at that meeting, the accompanying statement and updated forecasts will set the tone for the autumn.

If inflation data published in mid-July and early August comes in below expectations, there is an outside chance of an August cut. That would be a genuine surprise, but swap rates would react quickly, and lender pricing could shift within days. I will update clients directly if that happens.

For anyone reading this who has a fixed rate ending before the end of 2026: the right time to start the conversation is now, not in October. The 6-month window to lock in a new rate without paying an ERC is valuable. Use it. The difference between acting in July and scrambling in November could easily be 0.3%–0.5% on your rate, which on a £250,000 mortgage is £750–£1,250 per year.

As always, I am available for a no-obligation call for anyone who wants to talk through their specific situation. Whether you are a first-time buyer, a homeowner coming off a deal, or a landlord reviewing your portfolio, a clear picture of your options is always the right starting point.