According to a new study, over two-thirds of UK mortgage brokers expect interest rates to stop falling and resume their upward trend by the beginning of next year.
Butterfield Mortgages surveyed 300 brokers and 69 per cent said they believed the Bank of England base rate would be higher than the current level of 4.5 per cent by the start of 2026.
Over 28 per cent of brokers said they believed the base rate would sit at 5.25 per cent by the beginning of next year.
The survey marks a stark contrast to current speculation of further cuts from the Bank of England, which has slashed interest rates three times in the past six months.
Various lenders had already predicted further cuts, with Santander targeting rates of 3.75 per cent by the end of the year.
Analysts at Barclays and Morgan Stanley were more boisterous, predicting rates as low as 3.5 per cent.
However, Goldman Sachs took a step further, saying interest rates would hit 3.25 per cent by June 2026.
Butterfield Mortgages chief executive Alpa Bhakta said the results were “surprising” given the current sentiment around rates.
“This underscores the need for lenders to stay ahead of the curve – our research points to a clear demand for expert guidance in navigating the increasingly complex regulatory and tax landscape.
“Specialist lenders must utilise their network of regulatory and tax experts to help brokers support property investors to make confident decisions about their portfolios in the coming months.”
Stamp Duty changes will ‘complicate’ market
A majority of brokers, at 67 per cent, said they expected interest rates and the cost of borrowing to be the most crucial factor in the property market’s performance for the upcoming year.
The report said brokers were “also considering how government policy related to property regulations and tax will impact the market.”
Changes to the Stamp Duty allowance, announced by Chancellor Rachel Reeves in her Autumn Budget, would be the most disruptive policy brokers said.
From 1 April, the threshold at which first-time buyers start paying the tax will return to previous levels, dropping to £300,000.
The stamp duty threshold for all other buyers is also reverting back – the nil rate level will fall to £125,000 from £250,000.
They will then have to pay 2% on the portion between £125,001 and £250,000 and 5% on anything between £250,001 and £925,000.
A total of 64 per cent of brokers in Butterfield’s study said the changes forecast to be made in April would make the property investment landscape “more complicated to navigate”.
House prices jump ahead of changes
The looming deadline has seen buyers rush to beat the threshold changes.
Santander UK reported a 130 per cent increase in mortgage applications in the fourth quarter of 2024, as buyers looked to evade hiked costs.
The average house price jumped 0.6 per cent in January to £298,815, according to the Halifax House Price Index.
In February, prices dipped 0.1 per cent – equivalent to a £213 loss, as buyers remained keen to curb the April deadline.
The maintained high prices, boosted by Stamp Duty paranoia, shows a 2.9 per cent annual growth on the index.
According to Rightmove, 25,000 first-time buyers and 74,000 home movers in England may be unable to finalise their arrangements ahead of the changes.
Rightmove’s mortgage expert Matt Smith said: “As the stamp duty deadline edges nearer, we expect a rush to complete from those in the process of buying a home, particularly from affordability stretched first-time buyers eager to avoid unnecessarily parting with thousands of extra pounds.”