Expectations that UK interest rates may stay higher for longer, as well as revenue-raising measures in the budget, have prompted a leading estate agent to cut its forecast for house price growth over the longer term.

The revised forecast from Hamptons came days after Halifax and Nationwide banks said the annual rate of property price growth had slowed, with the former saying it was likely to be “modest … for the rest of this year and into next”.

The new analysis of the market is one of the first to emerge after the Bank of England’s quarter-point cut in interest rates to 4.75% last Thursday. The central bank’s warning that last month’s budget would push up inflation has fuelled expectations that interest rates will now take longer to come down.

However, while Hamptons said “higher [interest] rates for longer will weigh on long-term growth,” it is forecasting that the typical value of a home in Great Britain will end this year up 3.5% on where it was at the end of 2023, and is predicting a 3% rise in prices for 2025.

The firm said the property market had outperformed its original prediction that prices would stay flat this year. This “rebound” was attributed to a faster-than-anticipated fall in mortgage costs as inflation fell more quickly than expected.

However, it has downgraded its forecast for 2026 from 5% to 3.5%, which it said “reflects the dampening effect of higher interest rates alongside a fairly lacklustre and higher tax economy, which, while set to improve, remains weak on a historical basis”.

Beyond that, Hamptons said that “the new era of interest rates, likely to remain above 3%,” was expected to temper house price growth.

“The combined effect of persistently higher interest rates and sluggish economic growth is likely to dampen long-term house price performance compared to previous cycles,” said Aneisha Beveridge, the head of research at the estate agent.

Earlier this month, Nationwide said annual house prices grew at a rate of 2.4% in October – a slowdown from the near two-year high of 3.2% recorded in September.

Last Thursday, Halifax said that while the average price of a UK home hit a “record high” of £293,999 in October, the annual rate of growth had slowed to 3.9%, and the fallout from the budget “could keep mortgage costs higher for longer”.

Some experts predict that the chancellor’s decision not to extend temporary stamp duty thresholds put in place by the previous government will spark a rush in property sales early next year.

At the moment, buyers of homes worth less than £250,000 in England and Northern Ireland do not pay stamp duty (there are separate rules in Scotland and Wales) – a figure that was doubled from £125,000 in September 2022. The threshold is £425,000 for those buying their first home – up from £300,000. But these higher thresholds will end on 31 March 2025 and are set to revert to previous levels.

Nationwide is predicting “a jump” in house sales in the first three months of 2025, followed by a “period of weakness” during the next three to six months.