A mortgage market price war and a recovery in fine wine prices

It’s been a good week for borrowers. Rising unemployment, falling inflation and a (sort of) dovish cut from the Bank of England yesterday have set the stage for a competitive January among the mortgage lenders.

The BoE cut the base rate in a manner that was largely expected: November's 5-4 vote in favour of a hold flipped to a 5-4 vote for a cut to 3.75% as Governor Andrew Bailey changed his stance. Meanwhile, measures in the Budget to freeze fuel duty and rail fares, along with cuts to some energy taxes and a slowing economy, mean inflation is now expected to return close to the 2% target by spring 2026, rather than early 2027, as the Bank had projected only a month ago.

Price war

Mortgage lenders have been trimming fixed rates for several weeks, but the shift in the outlook will add momentum in the new year. 

“Most lenders have repriced lately, but we think this sets the stage for a price war in January," Simon Gammon of Knight Frank Finance tells the Times. “Lenders will begin the year with fresh targets for new business and will be eager to make headway, led by the larger high street banks.”

That could mean sub-3% fixed rates by spring, Simon adds, which will help offset some of the economic pressures that households are feeling. That said, consumer confidence is already beginning to improve, particularly attitudes to making more big ticket purchases, according to the latest GfK survey. At -17, the overall index is running at its highest level in a year, though granted that only puts sentiment back to December 2024 levels.

BoE surveys of business leaders published alongside the rate decision point to a measured return to growth in 2026, with economic activity expected to recover gradually during what appears likely to be a period of stability: "early reactions to the Budget announcement suggest the clarity it brought is unlikely to unlock a major rebound but might allow a more gradual and marginal increase in activity in some segments of the economy," said one. 

High-flying regions

This year's Wealth Report from Knight Frank took a deep dive into vineyard performance, reflecting not only growing demand from lifestyle buyers, but also our own deeper engagement with this marketplace. This rising interest comes on the back of a challenging three-year period for the fine wine market. Since peaking in September 2022 values across the market have fallen by just under 30%. However those recent vineyard investors might have hit the market at the right time. While wine values are lower year-to-date, the past three months have delivered the strongest growth in three years, raising the question: are we finally nearing the end of the downturn?

The answer could tell us a lot about how luxury consumers are thinking about the future, to find out more I spoke to Tom Burchfield of Liv-ex for a new podcast. Tom explains how this cycle differed from previous corrections. Unlike earlier downturns that disproportionately hit Bordeaux, the recent sell-off has been broad-based, with Burgundy, Champagne and other previously high-flying regions also retracing sharply. One notable exception stands out: Tuscany, which has once again shown resilience and remains slightly positive this year.

Our conversation explores the structural forces shaping the market, from an ageing collector base and subdued Asian demand, to US tariffs that triggered a sudden withdrawal of American buyers in April. Yet, rather than collapse, the market adapted. European buyers have stepped in forcefully, with purchase volumes up nearly 50% year-on-year, helping stabilise prices as value re-emerged. You can listen here, or wherever you get your podcasts.

Planning reforms

The number of planning approvals for new homes in England rose by 1% in the third quarter compared with the previous three months, reaching just over 7,100. The approval rate remained high at nearly 80%, according to official data.

The latest data points to a tentative improvement in the number of residential projects coming forward – for both minor applications under 10 units and major 10 plus unit schemes, writes Anna Ward. 

Approvals have stabilised as planning reform continues to be a central government focus. During Labour’s time in office so far – now coming up to a year and a half – the government has restored and raised mandatory housing targets for councils, announced an extra £48 million to boost planning capacity, and this week has launched a major consultation on a revamped National Planning Policy Framework. See Wednesday’s note for more. 

In other news...

Investment banks expect UK borrowing costs to fall further in 2026 (FT), and finally, Europe’s Property Firms Want to Buy Back Expensive Bonds (Bloomberg).