MILLIONS of UK homeowners could soon enjoy cheaper mortgage bills as interest rates are tipped to be cut to 3%.
Inflation dropped to its lowest point since last March in January, official figures showed this week.
This makes it more likely that the Bank of England (BoE) will cut rates as early as March, when its policymakers next meet.
A rates cut would bring a welcome boost for homeowners and first-time buyers.
When interest rates fall, it becomes cheaper to borrow money and brings down mortgage rates.
Economists now predict that interest rates, which are currently at 3.75%, could soon fall to 3%.
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Katharine Neiss, chief European economist at investment manager PGIM, said she expects rates to be cut in March, April and June – which would take them to 3% by the summer.
However, she added that a hike to the minimum wage expected in April could stop the Bank from “aggressively” cutting rates.
Yael Selfin, KPMG chief economist, added: “Given the favourable inflation outlook, the Bank is expected to cut interest rates three times this year, leaving interest rates at 3% by the end of 2026.”
Consumer Price Index (CPI) inflation, which measures how fast the cost of goods and services is rising, rose by 3% in the 12 months to January, the Office for National Statistics (ONS) said yesterday.
This was a sharp fall from 3.4% in the 12 months to December.
The ONS said the drop was driven by cheaper petrol prices, food and airfares.