Home buyers and borrowers across the UK have been handed a significant boost, with financial experts now predicting the Bank of England will cut interest rates before Christmas. Markets are pricing in an almost 90% chance of a reduction next month, a move that could see the base rate fall to around 3.4% by the end of 2025.
Government Measures Pave the Way for December Cut
Analysts say recent government interventions to ease the cost-of-living crisis have given the Bank's Monetary Policy Committee the necessary room to act. Measures such as freezing rail fares, reducing fuel duty, and providing support for household energy bills are helping to curb inflationary pressures. This creates a clearer path for the Bank to resume its rate-cutting cycle when it meets on December 18.
"The Bank of England can now be expected to resume its cutting cycle," stated Benjamin Jones, global head of research at Invesco. This sentiment is echoed widely in the City, marking a pivotal shift after a prolonged period of monetary tightening.
Mortgage Market Reacts with Immediate Rate Reductions
The anticipation of a lower base rate has already sent ripples through the mortgage sector. Major lenders Nationwide and Virgin Money have proactively announced cuts to their home loan rates by up to 0.19%. These reductions are designed to benefit a wide range of borrowers, including first-time buyers, those moving home, and customers looking to remortgage.
Nationwide's lowest rate is now reported at 3.60% for new and existing customers. Carlo Pileggi, Nationwide’s head of mortgage products, commented: "We're making rate cuts across our mortgage range... these competitively priced products give households some breathing room."
Industry brokers welcomed the move. "After a grim day for households yesterday, finally some good news," said Emma Jones of Whenthebanksaysno.co.uk. "These cuts could see other lenders follow suit, benefiting borrowers at a time when every penny counts."
First-Time Buyers See Best Opportunity in a Decade
Adding to the optimistic outlook, a new report from Lloyds Bank highlights that conditions for first-time buyers are the most favourable they have been in ten years. The combination of falling mortgage rates and wage growth outpacing property price rises has made home ownership more accessible than at any point since 2015.
Despite the positive momentum, some economists urge caution. James Smith of ING noted that while a December cut appears likely, the Bank must weigh the long-term inflationary impact of other government policies, such as a 4.1% rise in the national minimum wage and changes to pension tax benefits.
Nevertheless, for millions of households, the direction of travel is finally positive. As Omer Mehmet, managing director at Trinity Finance, summarised: "It's finally some positive news for households - the market could be starting to turn."
