With a decrease in inflation, analysts anticipate that the Bank of England will reduce interest rates in 2024, providing relief to numerous mortgage holders.
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Mel Stride, the Secretary of Work and Pensions, commented on the published decline in inflation, suggesting that it could enable the Bank of England to ease interest rates, particularly benefiting homeowners grappling with mortgage expenses.
Anticipated
During an interview on LBC Radio, he remarked, “The intriguing aspect is that this 3.9 percent is a more favorable figure than anticipated—many economists were contemplating about 4.3 percent. It might be that this is decreasing more rapidly than many had envisioned. This is genuinely positive news. I believe it’s a turning point. The economy will undoubtedly start reaping the benefits.”
He emphasized, “A more substantial drop in inflation implies that monetary policy might be relaxed a bit more swiftly than expected—in other words, a reduction in interest rates. These decisions lie within the purview of the independent Bank of England; they are not for me to predict. However, if inflation decreases faster than projected, it alleviates some pressure on the Bank of England to maintain higher interest rates, which, over time, influences mortgage rates.”
Nonetheless, some experts express concern that the central bank’s policy tightening is unwinding at a sluggish pace, potentially causing financial challenges for those reaching the end of their fixed-rate deals.
Tom Stevenson, an investment director at Fidelity International, believes that the Bank of England has been overly cautious in its approach. He stated, “The Bank of England’s choice to maintain rates at a 15-year high of 5.25 percent was facilitated by this week’s unexpected 0.3 percent GDP decline in October, coupled with other recent signs of weakness in the UK economy.”
Stevenson further explained, “The Bank of England itself has cautioned that nearly a million homeowners could face a £500 per month mortgage increase by 2026 as fixed-rate deals are repriced.”
Currently, fixed-rate deals are prevalent in the UK mortgage market, and millions may encounter higher repayments when their lower-rate agreements conclude in the coming months. Some households are on the verge of concluding favorable arrangements, with rates as low as one percent.
