Bank of England Governor Hints at Potential Interest Rate Cuts if Inflation Remains Stable
Posted on Saturday, 5 October, 2024
Bank of England Governor Andrew Bailey has signalled that further interest rate cuts could be on the table, provided inflation stays under control.
Bailey indicated that the Bank might adopt a “somewhat more aggressive” approach to the base interest rate in the coming months. In an interview with The Guardian, he said, “The economy has emerged from the shocks of the last five years more resilient than many expected, which gives us a foundation for growth.”
However, Bailey warned that instability in the Middle East could threaten the UK’s economic outlook.
Inflation and Recent Rate Adjustments
With inflation at 2.2%, just above the government’s 2% target, the Bank of England reduced the base rate from 5.25% to 5% in August after a narrow vote. This marked a drop from a 16-year high and provided relief for millions of households with variable-rate mortgages.
The Bank’s Financial Policy Committee estimated that around 1.7 million homeowners have benefited from an annual savings of approximately £120, according to The Times.
Still, roughly three million borrowers currently on fixed-rate deals below 3% will need to remortgage by 2027.
Shifts in the Lending Market
Meanwhile, Nationwide has recently announced that it will allow first-time buyers to borrow up to six times their annual income.
Mark Harris, CEO of SPF Private Clients, remarked on the Governor’s comments: “The prospect of more decisive rate cuts has been well-received by the market, with swap rates falling in response, which should lead to even lower mortgage costs.”
He added, “Many lenders are already revising their pricing, and this rate competition is good news for borrowers, offering some compelling deals that could help ease affordability pressures.”
