A leading mortgage broker is warning that hoped-for interest rate cuts may be smaller and slower than anticipated.

Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “Lenders have been reducing mortgage rates and enhancing loan-to-incomes, increasing the size of loan that some borrowers can access. 

“However, while the borrowing environment may be easing, higher inflation and the wider economic picture remains a concern, which could mean the pace and size of further base rate reductions is more gradual than markets thought only a short while ago.”

Harris’s comments come following the Nationwide’s latest house price index which shows growth slowing significantly to 2.1% in June, from 3.5% in May.

Prices declined by 0.8% month-on-month, after taking account of seasonal effects.  The Nationwide says the softening in price growth may reflect weaker demand following the increase in stamp duty at the start of April. 

Not everyone shares Harris’s view on rate cuts.

Tom Bill, head of UK residential research at Knight Frank, suggests: “Rate cut expectations are growing due to the weaker UK economic outlook. The bad news is that the Chancellor has zero financial headroom to play with, which means a re-run of 2024 and a game of ‘guess the tax rise’ ahead of the Budget. 

“We think there will be modest single-digit house price growth by the end of the year but if you are planning to sell over the next few months, asking prices will need to reflect the fact it is very much a buyers’ market.”

Jonathan Hopper, chief executive of Garrington Property Finders – a search agency – gives a stark warning to sellers in today’s market.

“In some areas, the flood of supply seems almost biblical. Estate agents are seeing a wave of new instructions that includes properties re-entering the market that were withdrawn from sale during last year’s uncertainty, as well as the traditional summer surge.

“This is not primarily a market correction prompted by falling demand, but one triggered by an inescapable imbalance: too many sellers, not enough serious buyers.

“In this environment, token price reductions of £5,000 to £10,000 just won’t cut it. The properties that are selling are those where sellers have responded with decisive, meaningful price adjustments, and their reductions are now showing up in the national data.”

Nathan Emerson, chief executive at estate agency trade group Propertymark, adds: “We still sit in a phase of inflation not quite being where the Bank of England ideally want it to be and we still have elevated base rates. Nonetheless, it remains encouraging that consumers are still approaching the buying and selling process with a firm degree of confidence.

“Across the year to date, we have seen the average number of properties per member branch hold absolutely steady, and this year’s number represent a figure that is almost 20% higher that the same period 12 months earlier.”