Mortgage brokers have told specialist lender Landbay that they are now expecting only two more interest rate cuts in 2025, following the release of higher-than-expected inflation data.

At a webinar launching its new product transfer service, Landbay polled 105 mortgage intermediaries on their view of the interest rate situation.

This was hours after the Office for National Statistics announced inflation had increased sharply to 3.0% on an annual basis in January, accelerating from 2.5% in the previous month – a rise that topped analysts’ expectations.

Inflation is now at its highest point since March 2024 and comes when the Bank of England is tasked with keeping inflation at 2.0%. 

According to its latest forecast, the central bank thinks inflation is set to hit 3.7% in the summer.

At the webinar, Landbay asked brokers “How many 0.25% base rate cuts do you now expect to see this year?”

While a majority of the mortgage introducers surveyed by Landbay (54%) thought there would be two more cuts this year, only one in seven (14%) of those polled thought that three more cuts before the end of 2025 was still realistic.  More than a quarter (26%) forecast one more cut in 2025.

A particularly pessimistic 4% of brokers thought there would be no more cuts at all and that the base rate would still be 4.5% at the end of the year. At the other end of the spectrum, an optimistic 2% of brokers said they expected the base rate to have fallen to 3.5%.

Rob Stanton, sales and distribution director at Landbay, says: “The Bank of England has warned inflation could hit a fresh peak of 3.7 per cent later this year. 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.

“While headline inflation is so far above its 2 per cent 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 per cent 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.

“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. The Bank of England is going to have to change its priorities in face of rising inflation and keep interest rates higher for longer. It’s well known that timing can make or break a deal in BTL, making broad product choice, easy application and fast decision making even more valuable to both brokers and landlords in such changeable market conditions. No matter the path of future interest rates, this has to remain a priority for lenders.”