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Interest rates to fall to pre-COVID levels

The International Monetary Fund have predicted that UK interest rates will drop to levels not seen since before the pandemic.

This is great news for UK residents who have been struggling with increased bills for things like credit card repayments, car finance and of course mortgages. Lower rates should equal lower repayments for many people having difficulties with spiralling costs due to high interest rates.

A fall in rates will mainly affect homeowners on a variable (or tracker) rate mortgage, as anyone on a fixed rate will already have a set interest rate agreed with their lender.

Who is the International Monetary Fund and what have they said?

The International Monetary fund or ‘IMF’ are a financial agency that work as part of the United Nations. They aim to promote and support economic stability for more than 190 member countries.

As a key financial figure, they have predicted that the UK’s current high rates of interest are only going to be temporary. This is down to spiralling inflation that has been adding to an increasing cost of living crisis in the UK.

Inflation has led to many families struggling with bills as prices rise for necessities like energy, heat and food. A decrease in inflation and interest rates should ideally lead to savings for many families who have been having financial difficulties.

Anyone who has been having a hard time with increased costs does have options for support available in the meantime. We have covered several cost of living support schemes in some of our previous blogs:

Interest rates are expected to fall due to a fall in the currently very high levels of inflation. Inflation simply refers to the cost of goods and services in the UK (the higher the price, the higher that inflation is).

Inflation should fall by the end of 2023 due to an ‘ageing population’ and lower productivity in the UK. This should then help to push interest rates back to the levels we were familiar with before the Covid-19 pandemic hit.

This good news not only for mortgages but also for anyone with finance agreements, credit cards and loans to repay.

Will low interest rates affect mortgage rates in 2023?

YES – a drop in interest rates should equal savings for many UK homeowners. Anyone on a variable rate mortgage could see an immediate decrease in monthly repayment costs.

  • Tracker rates are tied directly to the Bank of England base rate, so if that falls you could see much lower repayments moving forwards.
  • Standard Variable Rates (SVR) are controlled by the lender’s base interest rates, but lenders tend to reduce this if the BoE drops their rate.
  • Fixed rate mortgages won’t change their rates for existing customers, as this rate is set when you agree to the mortgage. New borrowers may benefit from lower rates though if rates decrease overall.

If you need some advice about your mortgage, speak to one of our highly skilled mortgage EXPERTS. They can explain any changes that may happen with your variable rate mortgage and search rates across the market to make sure the deal you have is the BEST available.

Speak to our specialists for FREE, FRIENDLY advice or read more about MORTGAGES here.

Useful resources

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

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