The majority of mortgage brokers expect interest rates to be higher by the start of next year, according to a controversial new study.

More than two thirds of mortgage brokers, from a 300-strong survey, believe that the Bank of England base rate will be higher than the current level at the start of 2026.

The survey, commissioned by Butterfield Mortgages, found more than a quarter of brokers even think base rate will be back at 5.25 per cent, returning to its peak back in August last year.

But one industry insider said 'brokers aren't economists,' and labelled the results 'baffling,' going against the grain of what is predicted elsewhere.  

This revelation comes despite January's surprise drop in inflation and the recent cut to the base rate at the Monetary Policy Committee's last meeting.

Of the 300 brokers surveyed at the end of January, 69 per cent believe the base rate will be higher than the current level of 4.5 per cent at the start of 2026.

The survey was carried out at the end of January. At that time, base rate was 0.25 percentage points higher than now. However, it's worth pointing out that market forecasts on future interest rates have not particularly changed since then.

Alpa Bhakta, chief executive of Butterfield Mortgages in the UK, said: 'It's no surprise that most UK brokers remain focused on the Bank of England's interest rate decisions—these have long been, and will continue to be, the key driver of market activity. 

'However, it is surprising that 69 per cent of brokers expect the base rate to be higher at the start of 2026, especially given January's decline in inflation and the Bank of England's indication that further rate cuts could follow.'

The results of the survey will come as a surprise to many given the Bank of England has cut interest rates three times since August from a high of 5.25 per cent to 4.5 per cent.

Market forecasts suggest interest rates are likely to be cut further this year with general consensus suggesting they will end 2025 around 4 per cent. 

Economists are also broadly in agreement with this and some think rates will be cut even further.

Economists at Capital Economics think the base rate will fall to 3.5 per cent by early next year.

Earlier this year analysts at Santander said they expect interest rates to fall to 3.75 per cent by the end of 2025 while Barclays was even more punchy saying rates will fall as far as 3.5 per cent.

Analysts at Morgan Stanley predict UK interest rates will fall to 3.5 per cent by the end of this year, while Goldman Sachs says interest rates will fall to 3.25 per cent by June next year. 

The results of the survey may be somewhat surprising therefore despite recent political and economic uncertainty, which may have led some brokers to assume there might yet be a twist in the tale. 

Geopolitical conflicts or the fact inflation has proven sticky and remained above the Bank of England's 2 per cent target may have been other factors. 

Chris Sykes, associate director at mortgage broker, Private Finance said: 'I'm really surprised by the results of this survey. The results are almost baffling.

'Brokers are not economists, brokers are brokers – working with the predictions of economists and the data in front of them to help source the best rate for their clients.

'Personally I haven't seen many, if any economists, predicting rates are increasing from here over the next couple of years and frankly the scaremongering of releasing something like this is just not good for the market.

'If mortgage lenders were expecting rates to be 5 per cent again we would not be getting rates close to 4 per cent at the moment. Some are sub 4 per cent.'

The survey also revealed that the majority of brokers expect interest rates and the cost of borrowing to be the most vital factor in the property market's performance in the coming year.

Brokers are also considering how government policy related to property regulations and tax will impact the market. 

Almost two thirds said that the changes forecast to be made in April, such as the increase in Stamp Duty, have made the property investment landscape more complicated to navigate.

'This underscores the need for lenders to stay ahead of the curve,' added Bhakta, 'our research points to a clear demand for expert guidance in navigating the increasingly complex regulatory and tax landscape. 

'Specialist lenders must utilise their network of regulatory and tax experts to help brokers support property investors to make confident decisions about their portfolios in the coming months.

'While market conditions have shown some signs of improvement, it's clear that brokers and lenders must collaborate closely. 

'Together, we can address the challenges ahead and ensure the property market remains resilient in 2025 and beyond.'