Home loan experts believe mortgage rates could be slashed to 3 percent by Christmas after the governor of the Bank of England signalled “more aggressive” cuts in the base rate.
Many City experts are predicting the current base rate of 5 percent could be cut both in November and December, bringing it down to 4.5 percent, following comments from the Bank’s governor, Andrew Bailey.
A number of banks and building societies have already reduced the on new home loans to below 4 percent, while some brokers are now expecting home loan rates could fall to around 3 percent before the end of this year.
Gabriel McKeown, Head of Macroeconomics at Sad Rabbit Investments, said: “With the latest comments from Bailey opening the floodgates to more aggressive rate cuts on the horizon, the UK economy may find itself surfing a wave of monetary policy change.
“While it’s challenging to predict the exact timing and magnitude of future rate cuts, if inflationary pressures continue to dissipate, we could see the base rate fall below 4 percent by the end of 2025, with the potential for a return to sub-3 percent levels in the near future.
“However, it’s important to note that geopolitical tensions, particularly in the Middle East, pose a risk to this outlook. Furthermore, the BoE must navigate carefully between supporting growth and maintaining price stability.
“For now, the UK’s monetary policy ship appears to be changing course, with Captain Bailey signalling full steam ahead towards more aggressive rate reductions.”
John Charcol technical manager Nicholas Mendes says: “If the Bank of England cuts the base rate to 4.75 percent or 4.5 percent by the end of this year, it could significantly impact rates, though the exact timing and scale of these changes will vary among different lenders and products.
He added: “Lenders are likely to pass on these reductions promptly to attract new business and outcompete rivals, which can be a significant advantage for consumers.
“If the base rate drops to 4.75 percent or 4.5 percent sooner than the market currently expects, it could provide a substantial boost to the property and markets, particularly after the challenges faced over the past two years.
“Given the competitive nature of lenders, if we see two rate cuts this year, I expect they will be quick to pass on reductions in funding costs to consumers. As a result, five-year fixed rates in the low 3 percent range could become available before the year ends.”
Swap rates, which are the figure financial institutions lend to one another, have fallen over the last 24 hours.
SPF Private Clients chief executive Mark Harris says: “A more aggressive approach to rate reductions has been welcomed by the markets, with swaps falling on the back of the governor’s comments, which should feed through to even lower pricing.”
Adam Stiles, Managing Director at Helix Financial Partners, told Newspage: “Andrew Bailey hinting at rate cuts coming sooner is excellent news for the and property industry and a clear signal to lenders to follow suit with rate cuts.
“We’d expect to see swap rates drop on the back of this hint with lenders dropping rates further as this is how they price fixed rates. A November rate cut looks extremely likely now, which will lower tracker rates.”
Rohit Kohli, Director at The Stop: “As we approach the festive season, many in the industry are hopeful for an early Christmas present from Andrew Bailey and his MPC elves. A 25bps rate cut could be the stocking filler homeowners are wishing for, helping to ease financial pressures.
Many City experts are predicting the current base rate of 5 percent could be cut (Image: Getty)
“However, if the Bank of England truly wants to give the economy a larger gift, a 0.5 percent cut before Christmas could offer a timely boost to retail sales, traditionally seen as a key indicator of the country’s economic health. It’s clear that the time for festive chatter from the Bank is over — what we need now is some real Christmas cheer in the form of action.”
Jack Tutton, Director at SJ Mortgages: “All signs point to a cut in the base rate next month, many market experts pricing in a cut in both November and December.
“As we approach the end of the year, lenders will want to start generating business for next year. Factoring Andrew Bailey comments and speaking so openly about base rate cuts being on the horizon, potentially before the year is out, we will hopefully see some significant cuts in lenders rates shortly.
“All of this will be much-needed relief to holders or people who hope to buy before the stamp duty changes that are due to come into effect in April.”