Mortgage Rates Are Falling Again… Is Now the Time to Buy? with Fraser Kelly

In this episode of the Scottish Property Podcast, Fraser Kelly, founder of Kelly Residential, returns to break down the current state of the UK and Scottish property market in early 2026.

The conversation dives into falling mortgage rates, shifting buyer demand, rental market normalisation, and how AI is beginning to reshape property search and estate agency. Fraser also shares key insights on Making Tax Digital and what it means for landlords moving forward.

📊 Economic & Mortgage Market Update

• UK inflation has fallen to 3%, signalling easing economic pressure

• Unemployment has risen to 5.2%, increasing the likelihood of rate cuts

• Strong expectation of a base rate drop from 3.75% to 3.5%

• SONIA swap rates are falling, with sub-4% mortgage deals returning

• Lenders are becoming more competitive, with lower fees and better products emerging

🏡 Scottish Property Market Performance

• Scotland annual price growth: +4.9% (vs UK 2.4%)

• Average property price: £191,000

• Scotland currently outperforming the UK by more than 2x

Top performing areas:

• South Lanarkshire: +10.3%

• North Lanarkshire: +9.4%

High-demand locations include:

• Motherwell

• Glasgow

• Paisley

• Falkirk

• Kirkcaldy

➡️ Demand is shifting toward commuter towns and more affordable areas

👀 Buyer Demand & Market Behaviour

• Properties receiving 30–40+ enquiries per listing

• First-time buyers are returning but still facing affordability challenges

• Offers of 20%+ over Home Report still common in hotspots

• Example: A Battlefield flat sold 24% over Home Report

🏠 Rental Market Trends

• Average rent in Scotland: £1,021/month

• Rental growth slowed to +2.6% (down from 11.7% peak in 2023)

Why demand is cooling:

• Fewer international students

• Increase in purpose-built student accommodation

• More renters transitioning into homeownership

➡️ Key takeaway: The market is normalising, not crashing

🧾 Making Tax Digital (Landlords)

• Starts: April 6, 2026

• Applies to landlords earning £50,000+ gross rental income

New requirements:

• Quarterly reporting to HMRC

• Digital accounting software required

• Full digital record keeping

⚠️ Likely impact:

• Increased costs for smaller landlords

• Potential exit of accidental landlords

• Further tightening of rental supply

🤖 AI & The Future of Property Search

• AI-powered search tools are being integrated into property platforms

• Buyers can search using natural language queries

• Image recognition and digital staging tools becoming more common

However:

• 96% of enquiries still come from traditional portals

• AI adoption expected to be gradual

💡 Key insight:

• Personal branding and trust will become even more important as AI levels the playing field

💡