The Bank of England is under pressure to cut the base interest rate twice more this year, including once next week.
A boost to the UK economy is needed, according to the International Monetary Fund (IMF), which says rate reductions will help growth.
Economic growth is expected to be slightly higher than previously forecast this year, but still only 1.2%, and 1.4% in 2026, the Daily Telegraph reports.
Cut certain
Mortgage brokers previously predicted a cut in interest rates is certain next Thursday, after the latest figures on economic growth.
The economy shrank by 0.1% in May after also contracting in April, according to the Office for National Statistics (ONS). Analysts were surprised by the fall in economic output, after expecting to see some growth.
On hold
Last month, Governor Andrew Bailey and the Bank of England’s Monetary Policy Committee voted by six to three in favour of keeping the base rate on hold at 4.25%. When the base rate was cut in May from 4.5% to 4.25%, that was the third reduction this year.
Target
The UK’s annual inflation rate was 3.6% in June, up from 3.4% in May, and well above the Bank of England’s 2% target. And inflation is one of the key measures the Bank factors into its calculations as to whether to reduce the base interest rate.
International pressures such as President Donald Trump’s US tariffs and war in the Middle East, also make up the economic picture the Bank considers.
Matt Thompson, head of sales at Chestertons
Matthew Thompson, head of sales at estate agency Chestertons, says: “As the economy shows signs of slowing, economists predict an interest rate cut to be announced on 7 August.
“We second this forecast and expect the Bank of England to reduce the current rate of 4.25% to 4%. Whilst this might not meet expectations of house hunters who have been hoping to see sub-4% rates this year, it will still encourage some buyers to go ahead with their property purchase.
“We have already seen a return in buyer confidence over the past month as the market witnessed more properties being put up for sale which has given buyers a larger pool of homes to choose from. Lower interest rates, even if only reduced by 0.25 percentage points, will only boost buyer motivation over the coming months.”