Bank of England close to cutting rates as IMF recommends reduction to 3.5%

As the economic landscape begins to show signs of significant improvement, there is growing optimism within the financial community that the Bank of England could be close to cutting interest rates. We delve into this in more detail and look at how today’s inflation figures impact any imminent rate cuts. 

Lenders Lead with Rate Cuts
In a proactive response to the shifting economic environment, major lenders such as HSBC, Barclays, and TSB have already started to lower their mortgage rates. This strategic decision has been influenced by favorable swap rate figures and positive global economic updates.

These early adjustments by banks are indicative of a broader expectation that the Bank of England is likely to cut rates sooner rather than later. 

IMF Recommends Interest Rate Cuts
Adding to the positive sentiment, the International Monetary Fund (IMF) has voiced support for reducing the current Bank rate from 5.25% to potentially as low as 4.75% or 4.5% by the end of this year. The IMF further suggests additional rate cuts into 2025, potentially reaching as low as 3.5%.

These recommendations are based on current economic trajectories and are intended to bolster economic stability and growth.

Today’s Inflation Figures Dampen Hopes
Despite these hopeful developments, today’s inflation figure of 2.3%—down sharply from 3.2% in March—did not meet economist predictions, signaling that challenges remain.

According to the chief economist at KPMG UK, while inflation is “within striking distance” of the Bank of England’s 2% target, this might not sufficiently reassure the more cautious members of the Monetary Policy Committee (MPC). Concerns about persistent high wage growth and robust economic momentum may still pose hurdles to an immediate rate cut.

Markets are now predicting and pricing-in a Bank of England rate cut in August.

Is your mortgage product coming to an end?
If your fixed rate deal is coming to an end, this is a key time to speak with our mortgage brokers who can help you navigate this with expert advice. Get in touch now on 0208 364 3444 alternatively click here to schedule a free consultation call.

Spring selling season boosts house prices
The average price of UK property coming to the market reached record levels in May, rising by £2,807, as the spring selling season lent itself to the recovery of the housing market.

According to a new report by Rightmove, homes up for sale in May cost an average of £375,000, up 0.8 per cent on last month.

The property portal said May is typically a strong month for price growth, with new price records having been set in May in 12 of the previous 22 years.

Rightmove said: “Price growth is still led by the largest-homes, top-of-the-ladder sector, with prices in this sector up by an average of 1.3 per cent compared with last year.

In London, property prices rose by just 0.1 per cent to £697,000, but the region still remains the most expensive place to purchase a home across the UK.

Sentiment in the housing market has shown signs of improvement this year despite mortgage rates increasing and the Bank of England continuing to hold interest rates at 5.25 per cent.

New mortgage product launched for foreign nationals
A building society has launched a new mortgage deal designed for foreign nationals and expats returning from overseas.

Most providers want foreign nationals to have been in the UK for at least two years and have built up a good credit file in the country, in order to demonstrate they can manage payments responsibly.

To combat these obstacles, Nottingham Building Society is offering a new mortgage deal where there is no minimum time of residency required in the UK.

There is also no minimum time remaining on a visa as borrowers are often required to have at least one year remaining on their documents. It will also require no minimum income and no UK credit history as it can access overseas credit files from 13 different countries.

The loan deposit on two, three and five-year fixed rates can be as little as 10 per cent if a credit file can be found or 25 per cent if not.

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