Housebuilders, which make up 50% of our PIN Fund (a fictional fund of property-related companies listed on the London Stock Exchange) fell considerably in value in the last quarter of 2024 due to a sharper-than-expected rise in inflation.

The 2.6% CPI inflation reading for November led many economists to suggest that the fall in interest rates will be much slower in 2025 than initially thought. Concerns over the impact of this on mortgage rates, and subsequent demand in the property market, therefore weighed on the housebuilder stocks in our Fund, which fell by 18% in Q4.

At its December meeting, the Bank of England held interest rates steady at 4.75%, with a more divided vote than anticipated. The Monetary Policy Committee (MPC) voted 6-to-3 to maintain the current rate, choosing not to follow the European Central Bank (ECB) and the US Federal Reserve, both of which eased monetary policy by a quarter percentage point.

While the Bank of England forecasts a stabilised base rate of 3.7% in 2026 and 3.6% in 2027, financial markets’ UK base rate predictions over the next five years are less optimistic. According to the Money To The Masses financial podcast, expectations are for a 4.15% base rate in January 2026, 4.08% in January 2027, 3.95% in January 2028, and 3.87% in January 2029.

Mortgage rates coming down, but still high
Moneyfacts reported at the end of December that the average standard variable rate (SVR) has fallen further below 8% month-on-month and stands at 7.85%, down from 8.18% at the start of 2024.