Andrew Bailey, the Governor of the Bank, said when speaking to CNBC on Tuesday: “I think that the path of interest rates will continue to be gradually downwards. I haven’t changed my mind on that.”
He added that bringing inflation down to the Bank’s two per cent target is a key aim. It currently stands at 3.4 per cent.
News of further interest rate cuts will hopefully pave the way for further reductions, which have continued their downward slide in recent months, despite the Bank opting to keep interest rates on hold at its last meeting.
Mortgage rates tend to fall when there is an expectation that the Bank’s base rate will come down, as this pushes down swap rates – the rates at which banks lend to one another, and which influence the pricing of fixed-rate deals.
Nick Mendes of brokers John Charcol said: “While swap rates are moving down and markets remain reasonably confident that the Bank will cut the base rate at some stage this year, the next cut in August is looking increasingly likely.
According to Moneyfacts, the average two-year fixed mortgage deal has dropped from 5.93 per cent a year ago to 5.12 per cent in June. Five-year deals have fallen from 5.5 per cent to 5.09 per cent over the same period.
But rates won’t fall further unless we have “stable, low inflation”, Emma Fildes, property adviser at Brick Weaver, said.
square MORTGAGES Britain's biggest mortgage lender among four major banks cutting rates
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As rates fall, prices run the risk of edging back up where demand is strongest, she warned.Ms Fildes said: “Overall, there is a hesitancy around the current market due to uncertainty brought on by the economic backdrop and global activities.
The aftermath of the Covid lockdowns, combined with Russia’s invasion of Ukraine in February 2022, triggered a huge inflation spike. The Bank responded by increasing interest rates.
They are now coming down but have not reached the previous lows of around one per cent.
“That is true for business and for consumers taking out or paying down mortgages.”
The hope is that both will have more confidence to borrow, to invest and to spend, he said, but added uncertainty in the Middle East and the “unpredictable” Trump administration both have the capacity to disrupt the trend.
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