Hopes of further mortgage rate cuts have started to fade as swap rates rise and market expectations for Bank Rate reductions weaken, according to analysis by Knight Frank.
In his latest update on outlook for the housing market, head of UK residential research Tom Bill says that borrowers who are sitting on a mortgage offer that pre-dates the swap rates increase should take heed.
He says: “Despite lacklustre economic growth, rising unemployment and the likelihood of an upheaval on Downing Street, we believe UK prices will rise by 3% in 2026.
“But an underlying assumption of two Bank Rate cuts this year has become less certain in recent weeks.
“While markets were fully pricing in two quarter-point cuts on 14 January, they were only assuming a 45% chance of the same happening a fortnight later.
“The five-year swap rate, which is based on market expectations and used to price fixed-rate mortgages of the same length, rose to 3.75% from 3.55% over the same period.
“It means you can expect fewer headlines about mortgage lenders dropping their rates.”
Bill says borrowers should consider these movements in swaps carefully if they are “sitting on a relatively more favourable mortgage offer that predates the latest spike”.
Already this week, NatWest, Santander, Principality Building Society and Gen H have announced price increases.
