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Interest rates to fall says IMF

The IMF or International Monetary Fund has announced their belief that the high interest rates in the UK will fall – and drop to pre-pandemic levels.

This is welcome news for those in the mortgage industry and of course homeowners and aspiring buyers. With interest rates having a direct impact on mortgage costs, a lower rate could mean big savings for many people across the UK.

In this blog, we are discussing the predictions made by the IMF, possible effects on mortgages and which mortgages will be most impacted.

The International Monetary Fund (a United Nations financial agency) states that interest rates should fall as inflation decreases. Inflation should drop due to ‘decreased productivity’ and the average age of UK residents getting higher.

The IMF are clear that they believe the current high rates of inflation and interest rates to be temporary, as interest rates should naturally be lower in an established economy. It’s not only mortgage holders who are set to benefit from a fall in interest rates. Interest rates also affect repayments for other financial products like:

  • Credit cards
  • Car finance
  • Loans

Learn more about mortgage interest rates in our latest Mortgage Interest Rates Update (February).

Interest rates are at a 40 year high in the UK, with the main cause of this being continuously rising inflation. The Bank of England (BoE) uses interest rates to try and control spiralling inflation (cost of goods and services). By increasing interest rates, demand for products like mortgages should decrease and in theory stabilise the economy.

High inflation can be put down to factors like:

  • High cost of resources like gas and oil
  • Increased cost of food and lack of supply
  • Supply chain bottlenecks
  • After effects of the Covid-19 pandemic

Anyone on a variable rate mortgage would likely see a big drop in the cost of their mortgage each month when interest rates fall.

If the Bank of England (BoE) lower their base interest rate, anyone with a tracker rate mortgage will see a change immediately. Tracker rates are directly tied to the Bank of England rate and will always change if it does.

Homeowners with a standard variable rate (SVR) mortgage will most likely see their rates lowered too. Lenders can change their SVR at their own discretion but will commonly adjust it in line with any changes the BoE makes to their rate.

Learn more about tracker rate mortgages.

Find out more about the latest BoE rate rise in our latest blog to learn more about this topic.

There are pros and cons to both fixed and variable mortgage rates and which is the right choice can vary from person to person.

If you think a variable rate mortgage seems a good fit for you, speak to one of our skilled mortgage specialists to find out more. We can help you swap your mortgage over quickly and easily and can compare available rates across over 50 of the UK’S TOP MORTGAGE LENDERS.

Learn more about fixed rate mortgages.

Find out more about variable rate mortgages.

We also have more on this topic in one of our recent blogs ‘Fixed rate vs tracker mortgages update’.

Bank of England – Interest rates and Bank rate

House of Commons Library – Interest Rates and Monetary Policy

Statista – Quarterly development of mortgage rates UK 2000-2023