Analysts expect the Bank of England to keep interest rates at 5.25% next week, as the pause in rate rises shifts into a longer interlude of rates kept on hold.
A survey of over 70 economists by Reuters found that 61 expected no move from the Bank of England next week.
Inflation data published over the past month has made it is less likely that the Bank will press ahead with further rate rises, with prices holding steady and widely expected to start falling form this month.
Forecasters now expect interest rates to peak at their current level — 5.25%. However there are concerns that higher oil prices remain a risk, and if this stokes further inflation the Bank may decide further action is necessary.
This wider economic view is reflected in recent price movements in the mortgage market, with many lenders edging down the pricing of both fixed rate deals across different sectors of the market – with the average two year residential fixed now at 6.34% compared to 6.85% at the start of August.
However, most analysts are not expecting the Bank to hurry when it come to cutting interest rates, even if the Prime Minister manages to meet the goal of seeing inflation halve this year. The consensus view among economists appears to be that that rate reductions will not happen until at least the middle of next year.
This may drive more demand for variable rate mortgages, such as trackers, although these will leave homeowners vulnerable should oil prices pick up again, potentially resulting in the Bank tightening monetary policy with a further rate rise.
Hargreaves Lansdown head of personal finance Sarah Coles says: “The question for many borrowers is how to long to fix for. Longer term fixes are cheaper but if someone opts for a two-year fix there’s a reasonable chance rates would be lower when they came to remortgage.”
