There is a low chance the Bank of England will reduce interest rates again tomorrow but two more cuts are expected before the end of 2025.
A poll of 61 economists by Reuters suggested the central bank would hold rates at 4.5% this time and the next cut could follow in May. August and November were named as months for further potential cuts.
If the base rate were to be cut it would have the most significant impact on those with tracker mortgages or variable rate products as it will mean they would benefit from lower repayments.
However, for those looking for a new fixed rate mortgage, price cuts have already been implemented by lenders who have been influenced by swap rates rather than the Bank of England’s base rate.
Many borrowers will be hoping if there’s no cut tomorrow, they will see reductions in the coming months, as the markets are predicting. But Laith Khalaf, head of investment analysis at AJ Bell said there were ‘substantial risks to this outlook’.
He said: “The latest inflation reading for January came in hot and the macroeconomic situation is volatile as Donald Trump’s trade policies threaten to unleash a global trade war, which could damage growth and push up inflation.
“The Spring Statement in the UK may also contain some tax and spending decisions which influence the interest rate committee one way or another. In April we will see the chancellor’s national insurance and minimum wage hikes come into effect which could also serve to increase prices for consumers, thereby making the Bank of England wary of cutting rates.”
He added: “At the last vote two members wanted to cut rates to 4.25%, which shows some willingness to stimulate the economy in the face of rising inflation.
“While we may not get a change in interest rates at this forthcoming meeting, the commentary and voting record will still be instructive as to the mood currently enveloping Threadneedle Street.”
Will mortgage rates fall over the longer term?
The news today Halifax was cutting its short-term two- and three-year fixed rates whilst increasing rates on the longer five-year fixes has led to suggestions by mortgage brokers that lenders are expecting interest rate cuts in the shorter term but are not so sure about how things will pan out beyond this.
It will add an additional complexity for borrowers deciding between a two-year or five-year fix so anyone in this situation is being urged to seek advice from a mortgage adviser.
Emma Jones, managing director at Whenthebanksaysno.co.uk was speaking via the Newspage agency. She said: “This pricing seems to suggest the Halifax is expecting rate cuts in the near term but is less sure about the direction of the base rate longer term.
“If you want longer term pace of mind, you’ll have to pay slightly more for it based on these changes. Ultimately, whether you opt for a two-year or a five-year fix comes down to multiple factors, so it’s important to get advice.
“Rates are once again proving choppy in an unpredictable market. All eyes are now on tomorrow’s Bank of England rate decision.”
