Big Relief for Mortgage Borrowers: Bank of England Set to Cut Interest Rates More Aggressively
Good news is on the horizon for mortgage borrowers as the Bank of England could move more aggressively to lower borrowing costs. Goldman Sachs, the global investment bank, predicts that interest rates will drop from the current level of 5% to 2.75% by next year.
This potential move would bring much-needed relief to homeowners and prospective buyers grappling with high mortgage rates.
At the moment, interest rates sit at a restrictive 5%, but Goldman Sachs analysts believe this will change significantly by November 2025. They anticipate that the Bank of England will cut rates faster than expected, bringing them down to 2.75%, a pace that outstrips current market expectations, which predict a slower drop to 3.5%.
The key driver behind this shift is the rapid decline in inflation. In September, inflation in the UK fell faster than anticipated, reaching 1.7%. This drop follows comments from Bank of England Governor Andrew Bailey, who indicated that policymakers on the Monetary Policy Committee (MPC) would take a “more aggressive” approach to reducing borrowing costs as inflation continues to fall.
Goldman Sachs believes that the Bank of England will adopt a more dovish stance as inflation cools, allowing for more substantial interest rate cuts than markets have priced in. For mortgage holders, this would be a welcome change, especially after the sharp rise in costs triggered by interest rate hikes aimed at combating last year’s inflation surge, which hit 11.1% in October 2022.
If the forecast holds, the Bank of England could reduce rates by a quarter of a percentage point at each of its next nine meetings. Such a move would not only ease pressure on mortgage borrowers but also boost the housing market, as lower borrowing costs would make homeownership more affordable.
Good news is on the horizon for mortgage borrowers as the Bank of England could move more aggressively to lower borrowing costs. Goldman Sachs, the global investment bank, predicts that interest rates will drop from the current level of 5% to 2.75% by next year.
This potential move would bring much-needed relief to homeowners and prospective buyers grappling with high mortgage rates.
At the moment, interest rates sit at a restrictive 5%, but Goldman Sachs analysts believe this will change significantly by November 2025. They anticipate that the Bank of England will cut rates faster than expected, bringing them down to 2.75%, a pace that outstrips current market expectations, which predict a slower drop to 3.5%.
The key driver behind this shift is the rapid decline in inflation. In September, inflation in the UK fell faster than anticipated, reaching 1.7%. This drop follows comments from Bank of England Governor Andrew Bailey, who indicated that policymakers on the Monetary Policy Committee (MPC) would take a “more aggressive” approach to reducing borrowing costs as inflation continues to fall.
Goldman Sachs believes that the Bank of England will adopt a more dovish stance as inflation cools, allowing for more substantial interest rate cuts than markets have priced in. For mortgage holders, this would be a welcome change, especially after the sharp rise in costs triggered by interest rate hikes aimed at combating last year’s inflation surge, which hit 11.1% in October 2022.
If the forecast holds, the Bank of England could reduce rates by a quarter of a percentage point at each of its next nine meetings. Such a move would not only ease pressure on mortgage borrowers but also boost the housing market, as lower borrowing costs would make homeownership more affordable.