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BoE abandons mortgage borrowers – now we may cut just ONE interest rate cut in 2024


Everybody expected the BoE’s rate-setting monetary policy committee (MPC) to sit on its hands once again. Yet the news will still come as a massive blow for mortgage borrowers, who were hoping for some respite. Fat chance.

Many will be wondering when the first interest rate cut will come through, and I’ve got disappointing news for them.

Interest rates are going to stay much higher for much longer than anybody anticipated at the start of the year.

Markets genuinely believed we would get six interest rate cuts in 2024.

So far, we’ve had none.

The Bank of England may cut rates as its next meeting in August, but the chances of that happening are shrinking by the day. It could wait until September.

And even if it does cut then, that might be it for 2024. Just one measly rate cut. Or two, if we’re lucky, with the second landing in December.

It’s devastating news for millions of homeowners who are struggling to pay their mortgage today.

For years we’ve been told that the BoE has a remit to keep consumer price inflation at two percent. Now it’s hit that target, and still won’t cut interest rates.

One reason is the general election. The MPC fears cutting rates today would have handed a boost to the Tories. So instead, its done a massive favour for Labour.

Poor Rishi Sunak, he just cannot catch a break.

Another reason the MPC didn’t cut is that services inflation is still high at 5.7 percent, suggesting inflation hasn’t been licked yet.

Core inflation was also high at 3.5 percent, while wages are growing at six percent a year.

Until they come down, we can whistle for that rate cut.

This means the cost-of-living crisis is dragging on and on.

Even though price growth has slowed, everyday essentials still cost more about 20 percent more than just a couple of years ago.

Which goes a long way towards explaining why the Conservative Party appears to be facing an annihilation right now.

Higher interest rate spell good news for savers at least, who can still get five percent on easy access.

But it won’t do much for our pensions and stocks and shares Isas.

Stock markets have been waiting for that first interest rate to cut as a trigger to start climbing again.

They may not get much joy until 2025. And perhaps not even then.

Anybody assuming that we are returning to the era of the interest rates needs to think again, too.

Even when rate cuts do finally come through, base rates are likely to hang around 3.5 percent to four percent.

In one respect, that’s a good thing. Near-zero interest rates helped fired property prices towards today’s unsustainable highs.

They also punish savers, who got next to nothing on their deposits.

Yet one rate cut today would have done more good than harm. The European Central Bank cut interest rates to 3.75 percent last week, without incident.

So how can we need to keep ours at 5.25 percent? Inflation is no worse over here. The Bank of England excessive caution is to blame.

Worse, it’s clearly not going to listen to its army of critics. Today confirmed that.

We seem doomed to face more disappointing news on this front, to the end of the year and probably beyond.

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