Mortgage Market Update Q2 2026: Markets, rates and demand

The escalation of tensions in the Middle East during the first quarter created uncertainty across financial markets, raising concerns about inflation and the future direction of interest rates. Encouragingly, as we moved through Q2, many of those concerns began to ease.

While geopolitical events continue to influence markets, confidence has gradually returned, with investors becoming increasingly optimistic that interest rates are unlikely to remain elevated for an extended period. As a result, attention has shifted back towards economic growth, affordability and opportunities within the property market.

Markets and interest rates: A more balanced outlook

During the second quarter, financial markets re-evaluated many of the risks that emerged earlier in the year. Energy prices eased from their highs, inflation remained lower than many had feared, and expectations of further interest rate reductions began to return.¹

This helped improve confidence among both borrowers and lenders. Market interest rates, which play an important role in mortgage pricing, also eased during the quarter, supporting the availability and competitiveness of fixed-rate mortgage products.²

While some uncertainty remains, especially as tensions continue in the Middle East, the overall outlook feels considerably more balanced than it did at the start of the year.

Impact on borrowing

Due to the ongoing uncertainty caused by the conflict in the Middle East, Swap Rates increased during the first quarter, contributing to higher mortgage rates across the market. The good news is that these rates largely stabilised during Q2 as inflation concerns began to fade and market sentiment improved.¹

Although mortgage rates remain above the historically low levels seen a few years ago, the lending environment has become more predictable. This provides greater certainty for those looking to purchase a property, refinance existing borrowing or expand a property portfolio.

Property sales and prices in key markets

The UK

• UK house prices continued to demonstrate resilience during Q2, with Nationwide reporting annual growth of 2.2% in June, up from 1.7% in May.¹
• While market activity softened slightly amid geopolitical uncertainty, improved mortgage pricing and easing affordability pressures are expected to support activity in the months ahead.¹
• For the prime market, conditions remain relatively balanced. Following the repricing seen in recent years, many high-value markets are now experiencing a period of stabilisation, with buyers becoming increasingly active where pricing reflects current market realities.

Jersey

• Jersey’s housing market remains relatively subdued, with Statistics Jersey reporting that average property prices were 5% lower in Q1 2026 than the same period a year earlier.³
• Transaction volumes also remain below historic norms, although the pace of price declines has moderated considerably compared with previous periods.³
• Market participants continue to expect a gradual improvement in activity should borrowing costs reduce further during the second half of the year.⁵

Isle of Man

• The Isle of Man property market has remained resilient, with average property values continuing to sit above pre-2021 levels and transaction activity remaining healthy.⁶
• Demand for quality family homes and lifestyle-led properties continues to support the market, particularly in and around Douglas, Onchan and other established residential locations.⁷
• The Island’s combination of relative stability, attractive lifestyle and limited housing supply continues to underpin long-term demand.

UAE

• Following a slower first quarter, Dubai’s property market showed renewed momentum during Q2. Residential transactions exceeded 34,000 during the quarter, with off-plan developments continuing to account for the majority of activity.⁸
• June was particularly strong, with transaction volumes rebounding significantly from May levels.¹⁰
• Although overall transaction volumes remain below some of the record levels achieved in recent years, pricing across many communities has remained resilient, reflecting continued demand from international investors and end users.⁹
• Looking ahead, the substantial pipeline of new developments will be an important factor to monitor as additional supply enters the market over the coming years.⁸

Helping you navigate a changing market

While market conditions continue to evolve, opportunities remain available for well-informed borrowers and investors. Whether you’re purchasing a family home, refinancing existing borrowing or expanding a property portfolio, access to bespoke lending solutions and specialist advice can make a significant difference.

Using our expertise and network of trusted advisers, we can help ensure your borrowing strategy remains aligned with your wider financial objectives.

For more information, please speak with your wealth adviser or get in touch.