Markets continue to adjust to a higher-rate environment

The Bank of England’s decision to continue holding rates is reinforcing the ‘higher for longer’ narrative, with swap markets reflecting expectations that any reduction in rates that were expected 12 months ago simply won’t take place in the current circumstances, with some economists expecting further increases over the next 12 months.

As markets continue adjusting to the reversal of expectations that were set for further rate cuts at the start of the year,  this shift in sentiment is feeding through into the lending market. In UK property, we are also seeing increased realism from both borrowers and lenders.  Over the last 12 months, Halifax data shows UK house prices moving broadly sideways, with modest gains in mid-2025 giving way to near-stagnation by spring 2026 as higher mortgage rates and affordability pressures dampened momentum. Northern regions continue to outperform while London and much of the South lagged behind.

Average mortgage pricing remained elevated over the period, with USwitch reporting average two year and five year fixed rate deals across all lenders being 5.49%, whilst this being 4.84% when averaged across the “big six” lenders (based on a 75% LTV). Elevated mortgage rates continue to weigh on affordability and buyer demand.

Investors are still being selective, but well-structured opportunities with strong underlying fundamentals are continuing to attract interest. There is also still a clear focus on downside protection, with lenders maintaining disciplined leverage levels and underwriting standards across the market.

Investors continue to be comfortable selectively committing capital to strong projects and strategies, particularly where returns remain aligned with the current rate environment. In a higher-rate world, strategies offering both income and exposure to tangible underlying assets continue to resonate.

We believe this reflects a broader and continued shift toward quality, discipline and predictability in capital allocation.

For investors, that's creating a backdrop for assessing opportunities with a focus on resilience, income and long-term value. At Amberton, these themes continue to shape conversations around how Noteholders position capital in the current environment.

If you would like to discuss the current market environment and opportunities emerging within it, please get in touch.

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