City experts expect Bank of England interest rate cut before Christmas | Personal Finance | Finance
City experts are now almost certain the Bank of England will cut interest rates before Christmas.
Markets are putting the odds of a move next month at nearly 90%, with a fall of 0.6 percentage points expected by the end of next year, which would take the base rate down to 3.4%.
Efforts to reduce inflation in the budget – including a freeze on rail fares, relief for drivers on fuel duty, and help with household energy bills – are thought to have cleared the way for a reduction on December 18.
Benjamin Jones, global head of research at Invesco, said: “The Bank of England can now be expected to resume its cutting cycle.”
The move has already sent ripples through the mortgage market. Nationwide and Virgin Money have announced rate cuts to home loans of up to 0.19%, benefiting first-time buyers, home movers, and those remortgaging.
Nationwide’s lowest rate now stands at 3.60% for new and existing customers looking to move home.
Carlo Pileggi, Nationwide’s Head of Mortgage Products, said: “We’re making rate cuts across our mortgage range, which should be welcome news to all types of borrowers.
“Whether it’s a first-time buyer, home mover or someone looking to remortgage, these competitively priced products give households some breathing room.”
Industry brokers were quick to welcome the news. Emma Jones of Whenthebanksaysno.co.uk told Newspage: “After a grim day for households yesterday, finally some good news.
“These cuts could see other lenders follow suit, benefiting borrowers at a time when every penny counts.”
Adding to the optimism, a new Lloyds Bank report says now is the best time for a decade to get onto the property ladder.
The report highlights that falling mortgage rates, combined with the fact wage rises have outpaced property prices, making home ownership more accessible for first-time buyers than any time since 2015.
Even so, economists caution that the Bank of England will be watching carefully. James Smith of ING warned that while a December cut looks likely, the central bank must weigh the longer-term effects of Reeves’ measures, including a 4.1% increase in the national minimum wage and limits on tax benefits for pension salary-sacrifice schemes.
Still, after months of high interest rates and a property market that has barely moved, borrowers may finally have reason to smile. As Omer Mehmet, Managing Director at Trinity Finance, put it: “It’s finally some positive news for households – the market could be starting to turn.”
