Economists at Goldman Sachs have indicated that the Bank of England’s base rate, which currently stands at 5 percent, may soon experience a reduction. This forecast is rooted in the latest economic data, which suggests a trend toward lower inflation rates, providing the Bank with room to consider cutting rates.
In a proactive response to these changing conditions, NatWest has announced a series of significant cuts to mortgage rates on new deals. These “highly aggressive” reductions signal a shift in the mortgage market, potentially benefiting many homebuyers looking to secure more affordable borrowing options.
Analysts expect that other lenders will likely follow NatWest’s lead in reducing their mortgage rates. This could create a competitive environment that further enhances affordability for consumers navigating the housing market.
This decision by NatWest comes in the context of comments made by Andrew Bailey, the governor of the Bank of England. He has suggested that rate cuts are being considered due to the rapid decline in inflation, which has exceeded expectations. Such moves could provide significant relief to borrowers in the near future.
Economists at Goldman Sachs have put forward their expectations that the Bank of England’s base rate, which currently stands at 5 percent, could see a significant reduction over the next 12 months, potentially dropping to as low as 2.75 percent.
This prediction suggests a shift in monetary policy as the Bank responds to evolving economic conditions. Analysts anticipate that a quarter-point cut may occur as early as November, which could be followed by two more similar reductions in December and January.
Such a change in the base rate could have substantial implications for borrowers and the wider economy, easing the financial burden on homeowners and businesses alike. As the central bank navigates its approach to inflation and growth, these anticipated rate cuts could play a crucial role in fostering a more supportive environment for economic recovery.
During a recent speech in Washington, Andrew Bailey noted that global inflation, including that in the UK, is decreasing “faster than we expected.” The current Consumer Price Index (CPI) inflation rate stands at 1.7 percent, which is below the Bank of England’s target of 2 percent.
As a result of this decline, economists believe there is an opportunity for quicker and more significant cuts in interest rates.
NatWest has announced plans to lower rates on selected two and five-year fixed-rate mortgage deals starting Friday. The reductions will benefit first-time buyers, those remortgaging, and buy-to-let investors, with rates decreasing between 0.41 percent and 0.2 percent, depending on the specific product.
Industry brokers have welcomed these cuts. Darryl Dhoffer, Managing Director at The Mortgage Geezer, commented, “These are highly aggressive rate reductions from NatWest and are poised to disrupt the market. Borrowers will be excited about these reductions, especially since they come ahead of the Budget.”
Ben Perks, Managing Director at Orchard Financial Advisers, remarked to Newspage that NatWest’s recent move makes its competitors “look rather silly.” He pointed out that while other banks are raising their rates, NatWest has made significant cuts to its product range. “The message is clear,” he stated, “they are not deterred from lending, are not afraid of the upcoming Budget, and are eager to lend in the last quarter of 2024. It’s game on for borrowers.”
Justin Moy, Managing Director at EHF Mortgages, added that the new purchase deals have “extra rocket power” with cuts of up to 0.4%. He believes these reductions will help stimulate market activity and attract the attention of other lenders. “This is a great move by NatWest, and other lenders will undoubtedly follow suit quickly,” he said.
Simon Bridgland, Director at Release Freedom, praised NatWest for “knocking it out of the park” with its significant rate drops. He noted that with increasing pressure on lenders to secure new business before the year ends, we might see more changes to fixed-rate deals in rapid succession. “This could mark the beginning of a competitive push from lenders trying to attract borrowers as we approach 2025,” he concluded.
Hannah Bashford, Director at Model Financial Solutions, commented on the recent cuts, stating, “Regardless of the reason behind these reductions, they are significant enough to attract attention. These aggressive rate changes could potentially influence the market dynamics, prompting other lenders to reassess their strategies. Additionally, this move will assist NatWest in reaching their year-end targets, as more competitive rates may draw in a higher volume of borrowers. With such a bold step, it’s difficult to imagine other lenders not feeling the pressure to follow suit.”
Katy Eatenton, Mortgage and Protection Specialist at Lifetime Wealth Management, also weighed in on the situation, noting, “NatWest doesn’t seem overly concerned about the upcoming Budget, as these cuts are substantial. This shows a level of confidence in their lending strategy and an eagerness to support borrowers. Other lenders will likely feel compelled to follow their lead, which is fantastic news for both borrowers and the property market as a whole. Such competitive rates can stimulate activity and create opportunities for those looking to secure mortgages in the current climate.”
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