The first interest rate cut in more than four years will take place next week, according to a poll of economists.
The survey, conducted by the Reuters news agency, showed the vast majority expected the Bank of England to cut interest rates at their August meeting.
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If the prediction proves to be correct, borrowing will become cheaper as the central bank-controlled interest rate will be dropped to 5%.
The figure is currently at a more than 15-year high of 5.25%, after 14 consecutive hikes.
Over 80% of economists, 49 of 60, in the 18-24 July poll said the Bank would make the cut.
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Differing opinion
There is no uniform consensus, however.
Markets are less certain. A very small majority (54%) are braced for rates to be held, while the minority (46%) have priced in a cut.
Even an earlier Reuters poll was slightly less categoric. Before the latest inflation data was released, a June poll had been more convinced of an upcoming rate reduction, with 97% of those surveyed anticipating a cut.
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In months gone by, markets and economists had held opposite positions, with market participants betting on a cut and economists forecasting a hold.
Elsewhere, the effect of forthcoming lower rates can be seen. One of the biggest mortgage lenders Nationwide announced it was offering a less than 4% five-year fixed-rate mortgage deal.
The interest rate was last cut in March 2020, according to the Bank of England’s database – around the same time COVID broke out across the UK.
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Why is borrowing so expensive?
Interest rates were brought up by the Bank in an attempt to reduce inflation.
It planned to bring inflation down to 2%. But while inflation has reached this low over the last two months, the Bank has kept rates at 5.25%.
