Doubts are growing over what the Bank of England will do next despite them giving home buyers a shot in the arm with an interest rate cut as Britain braces for a property sales rush ahead of next spring.
The Bank of England’s decision to cut the base rate by a quarter point to 4.75 percent – a 0.25 percent drop from 5 percent – should offer an immediate reduction in repayments to people with tracker mortgages if high street banks follow, as usual, by lowering their own rates in a similar way.
At the same time, there are hopes that banks and building societies will be launching cheaper two and five year fixed rate deals in the coming weeks.
However, previous forecasts on the future path of inflation and interest rates have been thrown into the air by the impact of the Donald Trump’s victory and the recent Labour budget, according to personal finance experts.
City experts say the threatened introduction of trade tariffs would push up prices, with the result the Bank of England, and other central banks, would be likely to keep interest rates higher than might have been expected.
Estate agents were expecting a surge in property sales as people, particularly first-time buyers, push through purchases before stamp duty concession comes to an end on April 1. This is because they want to avoid a change in property taxes that will add thousands of pounds to the cost.
Chief executive of the Foxtons estate agent group, Guy Gittins, said the rate cut will boost the mood of buyers.
Mr Gittins said: “With a stamp duty deadline now looming, we expect to see a supercharged level of market activity in the coming months as buyers look to complete before 1st April next year. Today’s decision to cut rates will only help add to this increased momentum and we now look set for a very strong end to the year and an even stronger start to 2025.”
Stephanie Daley, Director of Partnerships at mortgage advisor Alexander Hall, said: “Today’s cut will bring further confidence to those looking to move, many of whom had previously delayed their plans due to higher rates, and this release of pent-up demand will help to cultivate further property market positivity.
“Couple that with the increase in stamp duty as of April next year and we expect to see a rise in demand over the short term, which will also help to boost buyer confidence and potentially speed up transactions.”
Stephen Gomez, Mortgage Adviser at Wesleyan, said: “Mortgage rates have been slowly decreasing, and today’s decision means we’ll likely see further cuts by lenders.
“While it means homeowners are still going to be facing higher mortgage costs than they were a few years ago, we anticipate there will be better deals available in the weeks and months ahead which is positive news.”
However, Susannah Streeter, head of money and markets, Hargreaves Lansdown, warned about the impact of the Trump effect.
She said: “At a time of deep uncertainty about where inflation will head next, this decision will help provide some reassurance. But the waters ahead look murkier as the implications of Trump heading to the White House for a second term collide with the impact of the UK Budget.
“The Bank is expecting the Budget to boost inflation by just under half of a percentage point, due to direct and indirect effects of Rachel Reeves policies.
“Fresh nervousness has been sweeping bond markets amid fears that Trump’s policies look set to increase inflationary pressures and swell the US deficit even further, with knock-on effects expected for the UK economy. UK gilt yields were already jittery following the big borrowing plan outlined in the UK Budget.
“There are concerns that the increase in employers National Insurance contributions could be passed on in the form of higher prices of goods and services. Now these worries have been exacerbated by US Treasury movements and the knock-on effects of Trump’s policies.”
She added: “There is also concern that his trade policies could hold back Britain’s economic growth. The fear of a stagflation scenario emerging appears once again to be stalling markets and it’s going to make decisions at the Bank even more tricky in the months ahead.
“Financial markets are now expecting the Bank to go even slower on rate cuts than they were before Trump’s win, with an implied rate of 4.1 percent forecast for December next year.”
Rightmove’s mortgage expert, Matt Smith, backed the idea that future cuts in interest rates will be slower than hoped for.
He said: “This Base Rate decision comes at the end of a run of important macro-economic and political events on both sides of the Atlantic.
“All of this has resulted in a view that Base Rate will be cut at a more moderated pace than previously expected and has been priced in by lenders. Therefore, we are likely to see average mortgage rates drift up a little in the short term, before starting to fall back again.”
Andrew Montlake, Managing Director at Coreco, said Brits should view the prospect of future rate cuts with caution.
“Lenders have already increased their mortgage rates in the run-up to this decision, and it does seem that markets are now expecting rates to fall much slower next year than expected,” he said.
Adam Stiles, Managing Director at Helix Financial Partners, told Newspage: “We wouldn’t expect to see another Bank of England rate drop this year, but we hope to see lenders adjust their variables rates quickly.”
Ben Perks, Managing Director at Orchard Financial Advisers, said: “This decision could pour petrol onto the UK property market.
“This really is fantastic news for borrowers and lenders alike. All eyes now turn to swap rates that are sure to react positively, so I’m certain we’ll see better rates available to borrowers soon.”
