Borrowers looking for a bargain will be hoping for January sales from lenders with lower mortgage rates as we kick off the new year. The trend in new mortgage pricing was downwards in December, but mortgage rates are likely to continue to yo-yo over the first quarter of this year at least.

It is only when we start getting regular base rate cuts from the Bank of England that the market will respond favourably and swap rates, which underpin the pricing of fixed-rate mortgages, will fall. Until then, swap rates are likely to continue to fluctuate, making it harder for lenders to consistently offer lower mortgage rates. On the bright side, we have seen Halifax, Leeds Building Society and HSBC trim some of their fixed rates in recent days. We will wait to see if others follow suit.

The consensus amongst the markets and a number of lenders seems to be that we could see four interest rate cuts this year. These are priced in by the markets already, so any pricing changes in terms of new mortgage rates will be moderate.

There are some knowns and some uncertainty regarding the year ahead. Donald Trump takes office this month and has said he wants to place tariffs on imports; we don’t know what tariff the UK will face and on what, so there are potential inflationary pressures which could mean rates stay higher for longer.

The resolution of conflicts in Eastern Europe and the Middle East will hopefully reduce upward price pressures and supply-side inflation, e.g. that on energy, peat and wheat.

The Labour Budget made an immediate impact in the markets, with gilt costs rising. How employers react in the medium/longer term to changes in the budget (NI) could impact the employment markets and/or prices, with increased prices covering rising labour costs and/or recruit/retain fewer staff. Higher unemployment/lower investment from firms and lower consumer confidence could impact GDP, so maybe the scale of cuts is greater than is thought now, leading to a bigger reduction in mortgage rates.

On top of this are the unknowns (another conflict, next year’s Budget, global economic issues) that will impact positively or negatively depending on what the news is.

We expect the Bank of England Base Rate to be between 3.25% and 3.75% by the end of the year. Mortgage rates could be between 3.5% and 4% as appetite draws greater competition. Lower mortgage rates tend to mean greater affordability, which is good for borrowers and means more activity in the housing market.

Those looking to take out a mortgage in the coming months should plan ahead as much as possible. Should rates rise by the time you take out your mortgage, you are protected from those increases, but if rates fall, you can ask your broker to review what is available nearer the time.