Home Finance Interest rates alert as Bank of England panel could make several surprising...

Interest rates alert as Bank of England panel could make several surprising moves

The base interest rate could finally drop later this year, an expert has said.

The latest GDP figures showed the economy has returned to growth but analysts think the central bank will continue to be cautious about dropping rates.

Rob Morgan, chief investment analyst at Charles Stanley, told Express.co.uk: “The small uptick in growth seen this year is neutral for interest rates.

“It will neither alarm the Bank of England that rates are too restrictive nor cause it concern that the economy is too hot and unduly stoking inflation.

“That probably means the Bank sitting tight in the short term. The first reduction in UK interest rates from 5.25 percent will probably occur in August and there could be one, maybe two, further cuts this year.

“This will be seen from the BoE’s point of view as moderately restrictive still, and an appropriate balance given the need to both ensure the downtrend in price rises continues and provide a platform to cut more quickly in the event of an economic slowdown.”

Pete Mugleston, mortgage expert at www.onlinemortgageadvisor.co.uk, also predicted the Bank may hold off on dropping rates for now.

He said: “While GDP growth is always welcomed, it alone may not be enough to prompt the Bank of England to drop interest rates just yet. The decision will likely hinge on sustained economic performance and inflation trends.

“Despite the current growth, the sluggish economic momentum and ongoing inflationary pressures warrant a cautious approach, with potential rate cuts under consideration from June onwards.”

Chris Andersen, insolvency practitioner at CompanyDebt, said the central Bank faces a “dilemma” as growth in the economy is weak but inflation is still above its two percent target,

He explained: “The modest return to growth reduces the immediate pressure to cut rates. But if the recovery loses steam and inflation shows clear signs of easing in coming months, the Bank of England may pivot later this year and start gradually lowering rates to support growth.”

A mortgage expert recently told Express.co.uk that mortgage borrowers should act now ahead of the rates drop.

Ben Thompson, deputy CEO at Mortgage Advice Bureau, said: March saw an 18-month high in mortgage approvals, with new buyers pressing ahead with their plans.

“With this in mind, it’s right to not wait for the Bank of England to make the first move.

“Getting mortgage ready, speaking to a broker, and seeing what deals are out there are the right moves to make if you are planning a summer purchase.””

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