Financial experts are predicting further interest rate cuts by the Bank of England in 2025, despite the Bank's reluctance to cut rates significantly in 2024. The article explores forecasts from major banks and economic institutions, highlighting potential implications for mortgage rates and borrowing decisions.
Interest rates were only cut twice in 2024 with the base rate falling from a high of 5.25 per cent to 4.75 per cent. This was considerably less than economists and financial markets had forecast at the start of the year. This time last year, the general consensus was that the Bank of England would cut interest rates up to six times in 2024. Predictions varied from the base rate finishing the year at 4.25 per cent to it being as low as 3.75 per cent by now.
But a rebound in inflation, strong wage growth, a resilient economy and low unemployment rates has resulted in the Bank of England holding fire on many of those cuts. Markets are now predicting the central bank will cut rates three times next year to 4 per cent by the end of 2025. Typically, every economist and big financial institution has their own independent forecasts about where interest rates will go next year. We asked two major banks, Barclays and Santander, for their predictions, as well as economists from Capital Economics and Oxford Economics for their views. If these forecasts are correct, we consider what they will mean for mortgage rates and weigh up whether borrowers should be fixing for two years or five years. Santander Interest rates to end next year at 3.75% Back in October, Santander forecast that interest rates would fall to 3.75 per cent by the end of 2025. At that point the Bank of England base rate was at 5 per cent. Looking further ahead, economists at Santander also said they think interest rates will remain between 3 per cent and 4 per cent for the foreseeable future. Fast forward to the end of December and those same economists are sticking to their gun
INTEREST RATES BANK OF ENGLAND ECONOMY FORECASTS MORTGAGE RATES
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