Despite inflation reaching 2.6 percent, experts predict multiple Bank of England rate cuts in 2025. The CPI measure of inflation could reach 3 percent early next year, but mortgage rates are expected to gradually decline.
Inflation rose to 2.6 percent on Wednesday, but experts say it won't stop multiple Bank of England rate cuts in 2025. The Consumer Prices Index (CPI) measure of inflation could climb to 3 percent in the first few months of next year, but mortgage experts have said that rates on home loans will gradually fall if economists’ forecasts come to pass. Three expected four interest rate cuts in 2025, two thought there would be three whilst one more considered there to be two or three.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said the forecaster remained “comfortable” forecasting three rate cuts next year in February, May and November. But he added that Pantheon was starting to “contemplate” whether the Bank might wait until May for its first cut, as a response to persistent inflation. He predicted that inflation would rise to around 2.8 percent in January, but added: “We do think that by the end of 2025, CPI inflation will have fallen back close to 2 percent. But in the first half of the year, we suspect it will be a bit higher than most expect.” The Bank’s Monetary Policy Committee (MPC) tends to lower interest rates as it becomes confident inflation is returning to its 2 percent target. It has cut twice this year – taking rates to 4.75 percent – but is widely expected to hold them at this level when it meets on Thursday.Predictions of where interest rates will go in the future have a major bearing on Bank’s swap rates, which a key factor in mortgage pricing. If the MPC is expected to cut rates more quickly than previously, then swap rates fall, and so do mortgage rates. Mortgage experts have said that at the moment, lenders are likely to gradually reduce the price of their home loans in 2025 as rate cuts “feed through”. David Hollingworth, associate director at L&C Mortgages, said: “The forecasts on base rate movement next year seem to alter in how many cuts may feed through, but three or four gradual cuts aren’t out of the question
INFLATION INTEREST RATES BANK OF ENGLAND MORTGAGE RATES ECONOMIC FORECASTS
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