UK homeowners are set to save approximately £300 annually on their mortgage payments following an anticipated interest rate cut in December. This move is nearly certain as lenders have already begun lowering mortgage rates in anticipation of the Bank of England’s rate decision.
Analysts point to the Bank of England’s upcoming meeting on December 18, where policymakers are expected to reduce the current 4% base rate. This forecast comes after economic data revealed that the UK’s economy grew by a mere 0.1% in the third quarter, signaling a slowdown.
Thomas Pugh, partner and chief economist at RSM UK, emphasized the inevitability of a rate cut: “If a reduction wasn’t already assured, the latest data makes it almost certain now.” He also mentioned that the upcoming Budget could further reduce inflation, especially if it includes tax increases on income, which would provide additional rationale for lowering rates.
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“A front-loaded Budget aimed at disinflation, as hinted by the Chancellor, would likely impact household incomes and dampen consumer spending,” Pugh added.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, noted: “The disappointing economic figures increase the likelihood of a December rate cut by raising concerns about economic conditions, pushing many policymakers towards loosening monetary policy.”
Raj Badiani, economics director at S&P Global Market Intelligence, echoed this sentiment, stating that the data “increased the probability of an interest rate cut” this December.
Mark Harris, CEO of mortgage broker SPF Private Clients, observed that swap rates—used to price fixed-rate mortgages—have declined slightly following the release of the GDP figures. “It’s becoming increasingly likely that we’ll see a base rate reduction in December, especially given the narrow voting margin at the last meeting,” he said.
Harris further explained that mortgage rates are expected to fall gradually as lenders vie for limited housing market activity and aim to meet year-end targets. Borrowers have already benefited from lower mortgage rates in recent weeks, a trend that appears set to continue.