Interest rates look set to tumble this year in a boost for millions of borrowers worried about mortgage payments.
According to bets on financial markets, the Bank of England will cut rates six times in 2024, taking them from a 15-year high of 5.25 per cent today to 3.75 per cent by Christmas.
That would be a major boost for borrowers needing to remortgage and first-time buyers getting onto the housing ladder.
However, mortgage rates will still be far higher than they were before interest rates started rising at the end of 2021.
And analysts warned rates may not fall as far as investors betting on the financial markets expect.
Turning point: According to bets on financial markets, the Bank of England will cut rates six times in 2024, taking them from a 15-year high of 5.25% today to 3.75% by Christmas
The Bank raised rates 14 times in less than two years, taking them from a record low of just 0.1 per cent to 5.25 per cent, as it battled to bring inflation back under control.
That pushed up the cost of mortgages and other loans – squeezing households and businesses and denting economic growth.
But inflation has fallen from a peak of 11.1 per cent in October 2022 to 3.9 per cent – though this is still almost double the 2 per cent target.
With the economy slowing and inflation expected to continue to fall, there is now a one-in-three chance the Bank will press ahead with the first rate cut as soon as March, according to financial markets.
There is an 80 per cent chance rates will have been cut to 5 per cent or lower in May.
The Bank is then expected to cut rates at each of its last five meetings of 2024 – in June, August, September, November and December – taking them to 3.75 per cent.
The US Federal Reserve and the European Central Bank are also expected to cut rates in the coming months.
‘Although inflation has not gone away, it has fallen very rapidly,’ said Douglas McWilliams, deputy chairman at the Centre for Economics and Business Research.
‘Market interest rates are already falling and it is likely that rates on both sides of the Atlantic will fall gently during 2024, though a return to near zero rates is a long way off.’
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