Mortgage brokers predict just two more interest rate cuts in 2025

Mortgage advisers have signalled a cautious outlook, anticipating only two more reductions to the base rate in 2025, research reveals.

According to Landbay’s research, this shift in expectations emerged shortly after the Office for National Statistics (ONS) revealed a steep climb in inflation to 3% in January.

That’s up from 2.5% in the month before – which is higher than analysts had predicted.

Changing interest rate landscape

The lender’s sales and distribution director, Rob Stanton, said: “While headline inflation is so far above its 2% target rate, it would be a very bold move to cut borrowing costs – especially with the £25bn increase in employer national insurance contributions and 6.7% rise in the minimum wage due to come into effect from April.

“That will force businesses to pass on the higher costs of employment to consumers, raising their prices yet further.”

He added: “Brokers can’t see the future obviously, but the wisdom of crowds does give us some insight here and suggests that, when they’re talking to landlords, brokers should make it clear that the interest rate landscape has changed.”

‘Renewed squeeze for households’

Mr Stanton said: “While much of this is down to high energy costs, some of it is down to the government’s introduction of VAT on private school fees which has pushed overall inflation in the education sector to its highest point in nearly a decade.

“Transport costs are also rising with the bus fare cap increasing to £3.

“And food is getting more expensive, some of which is down to the packaging tax – that’s putting a renewed squeeze for households.”

He added: “The Bank of England is going to have to change its priorities in face of rising inflation and keep interest rates higher for longer.”

Highest inflation level

The data, marking the highest inflation level since March 2024, was unveiled just before Landbay hosted a webinar to introduce its latest product transfer service.

During the session, the lender surveyed 105 intermediaries about their projections for interest rates in the year ahead.

The Bank of England, charged with maintaining inflation at 2%, has forecast a potential rise to 3.7% by the summer, adding pressure to its monetary policy decisions.

When asked: “How many 0.25% base rate cuts do you now expect to see this year?”, more than half (54%) of the brokers indicated two further reductions.

Meanwhile, just 14% held onto hopes of three cuts by year-end, and more than one in four (26%) predicted a single drop.

A small but gloomy 4% predicted no changes, leaving the base rate steady at 4.5%, while a hopeful 2% envisaged it dipping to 3.5%.

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