Interest rates close to peak
- The Bank of England held the bank rate at 5.25% in their November 2023 meeting. Interest rates, through mortgage affordability, are a key determinant for the residential market outlook.
- Consensus forecasts compiled by HM Treasury suggest that interest rates are at their peak. Year end forecast for the bank rate for 2023 is 5.3%, then forecast to fall to 4.7% by year end 2024.*
- Swap rates give us a good indication of changes in mortgage costs – reflecting the cost of borrowing for lenders. 5 year swap rates reacted well to the Bank of England decision, now at their lowest level since May.
- The market is still adjusting to higher interest rates and mortgage approvals remain low, but with interest rates at or close to their peak improvement in sentiment should be evident from Spring 2024.Source: #Dataloft (https://dataloftinform.co.uk/), Investing.com *HM Treasury Forecasts as at October 2023.
The figures above tie in nicely with a meeting Jukes Estate Agents Harlow had with none other than the Bank of England a few days ago.
Jukes Estate Agents meeting with The Bank of England
On Tuesday this week (7th November 2023), Jukes Estate Agents Harlow, were honoured to be invited to a meeting with The Bank of England.
At this meeting they went into great depth as to how it all works regarding interest rates, swap rates, inflation etc.
It was quite an in depth meeting, but what came out of it is that they believe that the worse is behind us.
Below are their predictions:
Firstly, The Bank of England interest rate will stay at 5.25% for the next 6 months (end of Q2 2024).
Secondly, during the 3rd quarter of 2024 they predict a reduction to 5%.
Thirdly, during the final quarter of 2024 they are predicting a further reduction to 4.75%.
Then, throughout 2025 they predict further reductions to 4% by the end of the year.
Finally, they said that they expected the rate to settle at 3.75%.
Inflation in the short and long term
The Bank of England then went on to say that they expect inflation to have fallen to around 4.00 – 4.25% when the next set of figures are released on November 15th 2023. Their long term objective remains to get inflation to around 2%.
Are we going to have a recession?
The Bank of England think that we will narrowly avoid a recession in 2024. However, they did say that there is still a risk.