Interest rates have been cut by the Bank of England
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Bank of England next interest rate move in doubt despite 0.25 percent cut today

by · Manchester Evening News

Financial analysts are expressing worries over the prospect of future Bank of England rate cuts. The news comes despite officials at the Bank's home on Threadneedle Street today lowering rates by 0.25 percent.

There had been hopes of more cuts later this year. Yet political developments in the last seven days are now casting doubt on that, experts in the city say.

Home buyers have today received a boost with an interest rate cut, as the UK prepares for a rise in property sales ahead of next spring. The Bank of England's decision to reduce the base rate by a quarter point to 4.75 percent should provide repayment relief for those with tracker mortgages.

Meanwhile, there is anticipation that banks and building societies will introduce cheaper two and five-year fixed-rate deals in the upcoming weeks. However, previous predictions regarding inflation and interest rates' future trajectory have been disrupted by Donald Trump's victory and the recent Labour budget, say personal finance experts.

City professionals warn that the potential introduction of trade tariffs could inflate prices, leading the Bank of England and other central banks to maintain higher interest rates than previously expected. Estate agents anticipate a spike in property sales as individuals, particularly first-time buyers, rush to complete purchases before the stamp duty concession ends on April 1st.

This rush is due to a desire to avoid changes in property taxes that could add thousands of pounds to costs. Foxtons estate agent group's Chief Executive, Guy Gittins, believes the rate cut will enhance buyer sentiment.

The Bank of England has cut rates
(Image: Getty)

Mr. Gittins remarked: "With a stamp duty deadline now looming, we expect to see a supercharged level of market activity in the coming months as buyers look to complete before 1st April next year. Today’s decision to cut rates will only help add to this increased momentum and we now look set for a very strong end to the year and an even stronger start to 2025."

Stephanie Daley, Director of Partnerships at mortgage advisor Alexander Hall, commented: "Today's cut will bring further confidence to those looking to move, many of whom had previously delayed their plans due to higher rates, and this release of pent-up demand will help to cultivate further property market positivity. Couple that with the increase in stamp duty as of April next year and we expect to see a rise in demand over the short term, which will also help to boost buyer confidence and potentially speed up transactions," she added.

Stephen Gomez, Mortgage Adviser at Wesleyan, observed: "Mortgage rates have been slowly decreasing, and today’s decision means we’ll likely see further cuts by lenders. While it means homeowners are still going to be facing higher mortgage costs than they were a few years ago, we anticipate there will be better deals available in the weeks and months ahead which is positive news."

However, Susannah Streeter, head of money and markets, Hargreaves Lansdown, issued a caution regarding the impact of what she termed 'the Trump effect'. She stated: "At a time of deep uncertainty about where inflation will head next, this decision will help provide some reassurance. But the waters ahead look murkier as the implications of Trump heading to the White House for a second term collide with the impact of the UK Budget.

"The Bank is expecting the Budget to boost inflation by just under half of a percentage point, due to direct and indirect effects of Rachel Reeves policies. Fresh nervousness has been sweeping bond markets amid fears that Trump’s policies look set to increase inflationary pressures and swell the US deficit even further, with knock-on effects expected for the UK economy. UK gilt yields were already jittery following the big borrowing plan outlined in the UK Budget.

"There are concerns that the increase in employers National Insurance contributions could be passed on in the form of higher prices of goods and services. Now these worries have been exacerbated by US Treasury movements and the knock-on effects of Trump’s policies."

She added: "There is also concern that his trade policies could hold back Britain’s economic growth. The fear of a stagflation scenario emerging appears once again to be stalling markets and it’s going to make decisions at the Bank even more tricky in the months ahead. Financial markets are now expecting the Bank to go even slower on rate cuts than they were before Trump’s win, with an implied rate of 4.1 percent forecast for December next year."

Rightmove's mortgage expert, Matt Smith, has suggested that future interest rate cuts may not come as quickly as some have hoped. He explained: "This Base Rate decision comes at the end of a run of important macro-economic and political events on both sides of the Atlantic.

"All of this has resulted in a view that Base Rate will be cut at a more moderated pace than previously expected and has been priced in by lenders. Therefore, we are likely to see average mortgage rates drift up a little in the short term, before starting to fall back again."

Andrew Montlake, Managing Director at Coreco, advised caution regarding the prospect of future rate cuts. He noted that lenders had already hiked their mortgage rates ahead of the decision, and market expectations now suggest a slower pace of rate reductions next year.

Adam Stiles, Managing Director at Helix Financial Partners, shared his perspective with Newspage, saying: "We wouldn't expect to see another Bank of England rate drop this year, but we hope to see lenders adjust their variables rates quickly."

Ben Perks, Managing Director at Orchard Financial Advisers, gave an optimistic outlook following the decision, commenting: "This decision could pour petrol onto the UK property market. This really is fantastic news for borrowers and lenders alike. All eyes now turn to swap rates that are sure to react positively, so I'm certain we'll see better rates available to borrowers soon."