Knight Frank says that the Bank of England base rate is likely to stay unchanged at 5.25 per cent for at least the next few months.

The agency says that the five rate cuts predicted for 2024 by financial markets in early January have become three as strong wage growth has kept inflation higher for longer, pushing mortgage rates up again. 

Knight Frank says: “As expectations of a cut move further into the distance, the result for the UK housing market is that more lenders have nudged mortgage rates back above 4.0 per cent in recent weeks. The five-year swap rate (the instrument used to price fixed mortgages of the same length) topped 4.3 per cent last Thursday morning, which compares to less than 3.6 per cent in the period between Christmas and the New Year. The word that comes to mind is ‘ouch’.”

A spokesperson for the agency adds: “The signs are positive and demand indicators are heading in the right direction ahead of the spring market. Many buyers are cautious about the wider economic environment and, as the last two months have reminded us, realistic pricing is key. We had quite high expectations just after Christmas, but the market has been a little slower out of the blocks than we anticipated. 

“We had strong expectations towards the end of 2023, however the market has been slower out of the blocks than anticipated. The signs are pretty clear though that this year will be stronger than 2023 with offer levels up and buyer sentiment improving.”