FINANCIAL experts have said a cut by the Bank of England a week today is a near certainty following the US Federal Reserve cutting rates by 0.25% to a range of 3.5%-3.75% last night, the lowest level since 2022.
One even said the Bank of England could catch markets off-guard with “a 0.5% mega-cut”, while a mortgage broker predicted sub-3% mortgage rates by the summer.
Samuel Mather-Holgate, Managing Director at Swindon-based Mather and Murray Financial, a wealth manager, said that while the Bank of England doesn’t blindly follow the Fed, the US central bank’s decision to cut rates for the third time this year bodes well for the decision on 18 December.
He added: “The ultra-low rate party that raged for well over a decade is over but there is every prospect that we could be headed into an after-party where interest rates start with a three for a year or two.
“It will be less intense and shorter than the first party but will still deliver a boost to the business community, borrowers and the wider property market.
“I also believe markets are underestimating the possibility of a 0.5% mega-cut in the base rate, as the Bank of England, for once, seeks to get ahead of the curve.”
Bank of England to the rescue
Mike Staton, Director at Mansfield-based Staton Mortgages, agreed that a rate cut next week looks baked in: “This will be a welcome break for homeowners during a Christmas period where most will feel that they are being used as cash cows for the UK government’s benefit splurge.
“The one negative of a reduction will be that Labour will quickly manipulate this as propaganda to claim that its reckless Budget is working, when we all know that the Bank of England is trying to single-handedly save the UK.
“While HSBC is predicting a 3% base rate by the end of 2026, I am feeling bolder and believe we will see 2.5%, with lenders offering sub-3% mortgages by the end of summer next year.”
However, David Belle, Trader at Fink Money, warned that growth is not guaranteed even if rates are cut aggressively given the policies of the incumbent administration.
He said: “We really need growth. However, cutting rates alone isn’t guaranteed to deliver that as the Labour government’s policies are deeply anti-growth.”
Monetary after-party on
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, agreed with Mather-Holgate that things are looking more positive on the interest rate front.
He said: “The monetary after-party is very much on, with HSBC forecasting Bank Rate reaching 3% by the end of 2026 and the Organisation for Economic Co-operation and Development predicting 3.5% by mid-year. This represents a new neutral rather than a return to post-GFC zero rates.
“For borrowers, 2026 looks promising with typical mortgage rates expected to stabilise below 4%. However, 600,000 borrowers rolling off ultra-low fixes will still face payment increases.”
Philly Ponniah, Chartered Wealth Manager and Financial Coach at Philly Financial, said: “We are not going back to the zero-rate era, but a 3-point-something Bank Rate for several years is plausible. It will feel a lot better than the 5% to 6% shock of the past few years, even if it is not free money again.
“If HSBC is right about 3% Bank Rate by the end of 2026, that is good news for borrowers and for confidence in the housing market.
“Cheaper mortgages support prices and activity, but they will not override basics like incomes, lending standards and a lack of homes to buy.”
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