The latest Bank of England lending figures painted a mixed picture of the mortgage market, with applications falling during the quarter while gross lending edged up slightly.
Inflation is moving towards the bank’s 2% target, reinforcing expectations that the Monetary Policy Committee (MPC) may hold rates steady.
A survey of Primis brokers suggested that most expect the bank’s interest rates to rise again this year, with 59% believing the Bank of England will increase the base rate in the second half of 2025.
This included 14% who said a hike was ‘very likely’ and 44% who considered it ‘likely’.
The findings come as cost-of-living pressures continue to weigh heavily on households, with 61% of brokers identifying everyday expenses such as bills, food and energy as the biggest challenge facing customers.
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As a result, 58% said borrowers are becoming more cautious or delaying financial decisions, while 20% reported growing demand for shorter-term fixed rate deals.
The remortgage market was seen as the strongest area of consumer demand, cited by 67% of brokers, surpassing first-time buyers, as per the thoughts of 22% of brokers.
Mortgage costs to rise regardless
However, experts warned that recent market developments could still lead to higher mortgage costs for borrowers.
Dan Hill, research analyst at Savills, said that although markets largely expect no change in the base rate this week, external pressures remained a concern.
“Despite expectations that the Bank of England will keep rates unchanged this week, rising geopolitical uncertainty has pushed mortgage rates higher over the past month,” he noted.
Richard Pike, sales and marketing director at Phoebus Software, said rising mortgage pricing by lenders was already feeding through to the market, noting: “Lenders have been repricing upward in recent weeks, and the impact of that, along with any post-MPC repricing, will show up more clearly over the next few months.”
David Hollingworth, associate director at L&C Mortgages, said borrowers should consider locking into deals sooner rather than later, particularly given uncertainty over the path of future rates.
He added: “If market expectation improves and is sustained, then we could see a slowing in increases, but it’s too early to tell. Securing a deal and then reviewing rates again before completing will avoid suffering further hikes but still allows a switch to a cheaper product before completion if rates improve.”
Hollingworth said homeowners on tracker mortgages would welcome a decision to leave rates unchanged, noting: “If the bank leaves rates unchanged, homeowners on tracker mortgages will likely be delighted, given the talk of a need for higher interest rates. They will see no change to their monthly repayments, as their rate is directly pegged to base rate.”
Nevertheless, he cautioned that expectations for further rises have strengthened: “A hike in rates is now more widely expected by markets than it was, so tracker borrowers may want to consider how well they can cope if increases do come.”
For borrowers currently sitting on standard variable rates (SVRs), Hollingworth warned that waiting for fixed rate mortgages to fall could prove costly.
He continued: “Borrowers on standard variable rates that are waiting to see how things pan out could therefore be paying way more each month when an easing in fixed rates could take time, if it comes at all.”
He added that borrowers wanting flexibility could consider trackers without early repayment charges, saying: “Those that do want to sit and wait could still switch to a tracker with no early repayment charges to cut their costs now but still leave the door open to moving to a fix later.”
Rachel Geddes, strategic lender relationship director at Mortgage Advice Bureau (MAB), echoed calls for borrowers to review their options rather than delay decisions.
She continued: “Whatever the bank decides tomorrow, it pays to know your options rather than wait and see – that’s true whether you’re buying or due to remortgage.”
