All UK households who have a mortgage set for big change from ThursdayAll UK households who have a mortgage could benefit from a major change from Thursday. The Bank of England has been tipped to cut interest rate to the lowest level since 2023 in a boost for mortgage holders.
The Bank of England is expected to cut interest rates to four per cent on Thursday, according to City economists. Thomas Pugh, chief economist at RSM UK, said: “The committee is likely to stick to its gradual and cautious guidance, but the vote will probably be split three ways this time.”
James Smith, a UK economist at ING, said the Bank was in an “uncomfortable” position. He warned that if services inflation stays this high, it could become a long-term problem.”
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“Officials are concerned that when inflation reaches these levels, it is more likely to become embedded,” Smith explained.
Smith warned that policymakers appeared “reluctant to entertain the possibility of faster rate cuts”.
Smith said: “Over the last week, average mortgage rates have remained pretty flat in the build up to next week’s interest rate decision. Expectations are currently set on a cut next week, and I expect lenders will use this moment as an opportunity to reduce mortgage rates a little further.
“Rate drops have been very slow and steady this year, but someone looking to take out a mortgage right now is likely to see a notable reduction in the rate they’d have been offered this time last year, particularly someone looking to fix for two years. With average two-year and average five-year fixed currently level, it would appear to only be a matter of time before the typical two-year rate is cheaper than the five-year equivalent.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Fixed rates had bumped up slightly in the recent past, so in the last couple of days some banks have been cutting them in anticipation of a Bank of England rate cut.
“Assuming the rate is cut next week, we could see some competitive deals emerge after the announcement.
“However, further out, we may see cuts slow in the coming weeks. This is partly because expectations haven’t changed as much recently and are increasingly priced in.
“It’s also because lenders don’t want to go too far or too fast, or people who have already agreed a rate in advance will abandon it in favour of a cheaper one.”