FINANCIAL and property experts have said a combination of unemployment hitting 5.2%, slowing private sector wage growth and plummeting payrolls “has massively boosted the chances of a rate cut next month”.
They also say swap rates, which fixed rate mortgages are priced off, will continue to head south on the back of the grim jobs data, to the benefit of borrowers.
This morning, Gen H became the latest lender to trim its rates by up to 0.2%. One broker said mortgage rates will “consolidate in the 3% band if this economic slide continues”.
The UK unemployment rate for people aged 16 years and over was estimated at 5.2% in October to December 2025, according to official data published this morning.
Meanwhile, the early estimate of payrolled employees for January 2026 decreased by 134,000 (0.4%) on the year, and by 11,000 on the month, to 30.3 million.
Annual growth in employees’ average earnings in Great Britain was 4.2% for both regular earnings and total earnings in October to December 2025.
Rate cut chances boosted
Zaman Sheikh, Director of Northwood Chelmsford and WN properties estate and lettings agents in Shenfield and Chelmsford, believes a rate cut by the Bank of England is now as good as baked in.
He said: “This morning’s bleak job market data has massively boosted the chances of a rate cut next month. Markets are now pricing in a roughly 75% chance of a base rate cut and that will increase further if inflation drops towards target on Wednesday as expected.
“Swap rates should continue to edge down after this jobs data and that will feed into mortgage rates, which will support transaction levels in the months ahead.
“Rates creeping down will be a boost to aspiring homeowners in particular, for whom every small rate cut counts. Lenders have already been cutting rates at high loan-to-values (LTVs) across the board and further rate cuts will put even more fire in the belly of first-time buyers (FTBs).
“FTBs are really active at present. In fact, they are more active than they have been for a long time.
“In Essex, we are inundated with FTBs relocating out of London and into Essex areas such as Shenfield, Brentwood and Chelmsford as their money can go a lot further here and they get a lot more bang for their buck.”
Double-edged sword
Riz Malik, Director at Southend-on-Sea-based R3 Wealth, agreed that the dire jobs data makes a rate cut more likely but is worried about the wider uncertainty gripping the jobs market.
He said: “For those who want the Bank of England to cut rates, one of the likeliest scenarios in which it will do so is a cooling labour market. And that we categorically have.
“However, while this latest job’s data may lead to the expectation of further and quicker rate cuts, which is great news for borrowers, it is a double-edged sword and will also have an impact on consumer confidence.
“Just because the mortgage on your next house may be cheaper, if you are worried about your job, you are less likely to make big financial decisions.”
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said the latest jobs data is further proof that the economy’s slowdown is well underway, which will see mortgage rates get even more competitive.
He said: “Swap rates, and mortgage rates with them, will continue their slide throughout 2026 based on this evidence. Yes, there will be blips as other factors affect the economy, but we will see mortgage rates consolidate in the 3% band if this economic slide continues.”
