BoE Rate Cuts to End at 3.5% by Mid-2026: Mortgage Outlook for UK Borrowers

The latest OECD projections indicate a significant shift for the UK mortgage landscape, forecasting only two more Bank of England rate cuts before they cease in mid-2026, settling at 3.5%. This outlook suggests a stable yet mildly supportive environment, critical for UK-based Day-Rate Contractors, Self-Employed Directors, First-Time Buyers, and those with Complex Financial Situations. Understanding these shifts is crucial for planning future borrowing and navigating tighter affordability assessments in an evolving economic climate.

The Organisation for Economic Co-operation and Development (OECD) predicts the Bank of England will conclude its easing cycle by the second quarter of 2026, leaving the bank rate at 3.5%. This means limited further rate reductions for mortgage borrowers, including Day-Rate Contractors and Self-Employed individuals seeking finance. While offering a measure of stability, it dampens hopes for an aggressive cutting cycle that might have spurred a stronger housing market rebound, impacting borrowing costs and product availability.

Despite forecasts of the UK outperforming some G7 peers, higher taxes and tight public spending are set to constrain household income and consumption, according to the OECD. For First-Time Buyers and clients with Complex Financial Situations, this translates into continued pressure on real incomes. Lenders are expected to maintain cautious criteria and pricing, reinforcing the need for robust affordability checks. A softening labour market and modest unemployment rise further necessitate careful financial planning for all unique borrowers.