INTEREST RATE HIKE FEARS RECEDE IN BOOST FOR BORROWERS

Pressure on borrowers eased yesterday as interest rate hike fears receded – providing relief for Britain’s battered housing market.

Traders are betting there will be just one Bank of England rate rise this year, having previously predicted as many as four as war raged in the Middle East.

This will feed through into the deals being offered by lenders for fixed-rate mortgages. 

Those rates have gone up sharply since the start of the war – from 4.83 per cent to 5.9 per cent for an average two-year fix and from 4.95 per cent to 5.58 per cent for a five-year deal, according to Moneyfacts.

Figures yesterday illustrated how the squeeze on borrowers has rocked the housing market, sending prices lower and knocking a recovery in activity off-course.

It has also led to a slump in construction. The industry suffered a ‘sustained downturn’ last month – and the biggest step-up in cost inflation since 1997 – according to a monthly purchasing managers’ index survey from S&P Global.

But relief could be under way as interest rate expectations ease – a move reflected in ‘swap rates’ that are used to price mortgages – and have started to reverse the sharp increases seen since the conflict began. 

Adam French, head of consumer finance at Moneyfacts, said: ‘It should take the immediate upward pressure off mortgage rates.

‘However, rates are likely to remain higher for some time yet. The volatility of the conflict can quickly move markets, which may leave many lenders cautious about making any sudden moves.

‘The longer the ceasefire holds and markets calm, the more the mortgage market will stabilise, and rates could even begin to edge lower. 

'But for now, it’s more likely to slow or pause increases rather than trigger any sharp falls.’

It came as data from Halifax showed house prices fell 0.5 per cent in March, reflecting ‘wide uncertainty regarding the conflict’.

Meanwhile, a poll of estate agents showed new-buyer enquiries in March at their lowest level since August 2023, while agreed sales also fell sharply.

The survey from the Royal Institution of Chartered Surveyors showed the market ‘losing momentum as rising borrowing costs and wider geopolitical uncertainty weighed heavily on buyer confidence and sales’. 

Tarrant Parsons, head of market research and analysis, said: ‘What had been a cautiously improving picture for activity has been knocked off-course by the wider macro fallout from the conflict.’

2026-04-08T21:20:17Z