The base rate should drop to 3.8% by 2025, according to Rob Elder, agent for Greater London at the Bank of England.
Speaking at the Mortgage Business Expo yesterday (10th October), Elder provided insights into the economic outlook.
He pointed out that inflation has returned to around 2% after peaking at 10%.
Elder said: “Financial markets think there’s going to be one more interest rate cut this year in November to 4.75%.
“And then back in August, they expected rates to fall to 4% by the end of 2025.
“The latest expectation is 3.8% and it’s been as low as about 3.4%, so financial markets are shifting around a bit.
“There was a period in September when they thought that there’d be more interest rate cuts because they were worried about what was happening in the US.
“That seems to be winding down recently, because of concerns about the Middle East. So we will see.”
Elder explained the implications of higher inflation, saying: “If the Bank of England said we will live with inflation of 4%, interest rates in the UK would be two percentage points higher forever, and that would be huge news for the property market.”
He warned: “There is no easy way out of a dreadful crisis that has caused price inflation to go up.
“If we don’t squeeze it all out again and get back to 2%, then interest rates will be permanently higher than they would otherwise be.”
