Hopes of further mortgage rate cuts are starting to fade as swap rates rise and market expectations for a bank rate cut weaken, Knight Frank analysis shows.
In his latest update on the housing market outlook, Tom Bill, head of UK housing research, says borrowers with mortgage offers that predate the rise in swap rates should take this into account.
He said: “Despite lackluster economic growth, rising unemployment and the likelihood of unrest in Downing Street, we think UK prices will rise by 3% in 2026.
“But the underlying assumption of two bank rate cuts this year has become less certain in recent weeks.
“While markets fully priced in the two quarter-point cuts on January 14, they assumed there was only a 45% chance the same thing would happen two weeks 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% in the same period.
“It means you can expect fewer headlines about mortgage providers cutting their interest rates.”
Bill says borrowers should carefully consider these moves in swaps if they are “sitting on a relatively more favorable mortgage offer that predated the last peak.”
This week, NatWest, Santander, Principality Building Society and Gen H have already announced price increases.