Bank of England multiple interest rate cuts expected in major boost for mortgage borrowers
Posted on Saturday, 4 January, 2025
The Bank of England may take more decisive action to reduce borrowing costs this year, offering positive news for mortgage holders.
A recent survey of 51 economists predicts the Bank will lower interest rates at least four times in 2025.
According to the poll, the base rate could decrease from the current 4.75% to 3.75% or lower by next year. Most respondents foresee four quarter-point cuts aimed at stimulating the UK’s slowing economy.
The projections surpass the two rate reductions anticipated by financial markets for 2025. Additionally, 15% of economists surveyed expect rates to drop to 3.5%, while three foresee cuts reaching 3.25%.
Policymakers will need to navigate concerns over sluggish economic growth, with most economists projecting inflation to stay between 2.5% and 3.5%.
Wage growth remains a key driver of inflation, with 37% of respondents identifying it as the primary factor.
Andrew Sentance, former member of the Bank’s monetary policy committee, highlighted that “pay rises of 3-4% still lead to labor costs increasing by about 6% when the National Insurance rise is factored in.”
Last month’s Bank vote revealed a divided committee, with three members supporting a rate cut to 4.5% and six advocating for rates to remain at 4.75%.
If multiple rate cuts occur this year, it could provide significant relief for mortgage borrowers, who have faced rising costs since interest rates were increased to 5.25% to tackle inflation, which peaked at 11.1% in October 2022.
