Economists Suggest Potential Bank of England Rate Cut in 2024: Implications for Mortgage Market

A recent survey of leading economists by City AM, a prominent London-based business newspaper, indicates a growing belief that the Bank of England (BoE) may implement a base rate cut as early as March. Of the 21 experts polled, nearly one-third anticipate a rate cut in March, with a similar number suggesting May, 19% indicating June, and 29% predicting August. The most cautious economists projected a rate cut in 2025.

The survey also revealed that a significant majority (86%) of economists view the BoE's monetary policy committee as overly hawkish in their rhetoric on interest rates. This cautious approach aims to curb inflation without triggering an economic recession.

Concurrently, swap rates continue to decline, prompting expectations among brokers that mortgage rates may see further reductions in the coming weeks, regardless of the BoE's decision.

Matt Smith, Rightmove's mortgage expert, notes, "It looks like lenders are likely to give early 2024 movers the belated Christmas present of lower mortgage rates." He highlights the positive signs emerging as a result of reduced swap rates, indicating potential rate cuts by lenders in the near future. The increased home-mover activity observed at the beginning of the year suggests growing interest from those seeking mortgages.

The trend of rate reductions began before Christmas, with Generation Home introducing a five-year deal at 3.94%, falling below the psychologically significant four per cent level. Halifax, the country's largest mortgage lender, also made significant cuts, reducing its two-year remortgage rate by 0.83%. Other lenders under Lloyds Banking Group, including Scottish Widows, First Direct, Shawbrook, TSB, and BM Solutions, followed suit. Leeds Building Society and HSBC also joined the wave of rate reductions, offering competitive options for borrowers.

David Hollingworth, Associate Director at L&C Mortgages, remarks on the fast-paced market changes, emphasizing that these rate cuts follow New Year improvements by Halifax, with expectations of further adjustments by other lenders.

The evolving economic landscape and potential rate cuts pose interesting implications for the mortgage market in 2024.