12:01 AM, 26th May 2026, 1 hour ago
Landlords weighing up remortgages, sales or new purchases could see mortgage costs rise this year thanks to a looming bonds market clash, one property expert predicts.
That is being fuelled by concerns around the policy agenda of a potential new government.
Tom Bill, the head of UK residential research at Knight Frank, says higher borrowing costs, energy price pressures and political uncertainty are now adding fresh strain to the housing market.
He said: “The key issue for the property market is what a new Chancellor would mean for inflation.”
Financial crisis
The 10-year yield on UK government debt has been trading above 5% recently, its highest level since the global financial crisis in 2008.
The rise has been partly driven by inflation concerns linked to conflict in the Middle East, with energy price shocks leaving the UK exposed to further price pressure.
However, Mr Bill says the increase also reflects investor concern over the prospect of a Labour government moving to the left of Sir Keir Starmer’s current administration.
A Labour leadership contest could produce a government with a looser spending agenda, higher borrowing plans and a greater inflation risk, he warns.
Higher inflation expectations tend to push up swap rates, which lenders use to price fixed-rate mortgages.
House prices downgraded
Mr Bill explains: “If borrowing costs continue to rise, it will dampen prices and, to a lesser extent, transaction volumes.
“It’s a calculation that buyers and sellers face if they are deciding whether to act now or this autumn.”
The pressure comes as the latest RICS UK Residential Market Survey found ‘muted conditions are likely to persist over the coming months’.
Knight Frank has downgraded its house price forecasts across all UK markets because of the jump in borrowing costs and the prospect of another tax-raising Budget.
Political ambitions
Mr Bill said the clash between political ambition and debt markets had already been visible in the past week.
He said: “We have seen the gap between political ideology and the hard-headed reality of debt markets.”
Paula Barker, an MP backing Andy Burnham for the Labour leadership, said that “markets will have to fall in line”.
Mr Bill said the statement was “the equivalent of a homeowner asking their mortgage lender to fall in line”.