On Thursday the European Central Bank (ECB) has cut interest rates to 3.75% for the first time in five years and they raised its inflation forecast until 2025.
Borrowing costs in the eurozone are now lower from record highs of 4% to 3.75%.
Newspage asked experts whether this could see the Bank of England follow suit at its meeting two weeks today, how lenders could react and whether this is a positive for UK borrowers and the wider property market?
In a statement the ECB said, “The governing council today decided to lower the three key ECB interest rates by 25 basis points.
“Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady.”
Andrew Montlake, managing director at Coreco said, “The ECB has today potentially fired the starting pistol on UK rate reductions in the months ahead.
“Markets will now be salivating at the prospect that the UK will soon follow suit, but the Bank of England has proved to be more cautious and a change before the summer is still unlikely.
“Threadneedle Street may also be loathe to move before the General Election is out of the way for fear of being accused of not being independent, and they will want to see more concrete data that inflation in the UK is looking more likely to stay low rather than bounce again in the final quarter of the year.
“I hope the Bank will be brave and follow suit sooner rather than later as the country is crying out for an easing in policy.”
Justin Moy, managing director at EHF Mortgages said, “This first cut in five years from the ECB gives the Bank of England the licence to cut the base rate at its June meeting.
“This, in turn, will see swap rates edge down, resulting in lower mortgage rates. Elections need to be mutually exclusive to these decisions, ensuring that borrowers start to benefit immediately from the austerity measures of the past few years.”
Katy Eatenton, mortgage & protection specialist at Lifetime Wealth Management said, “A drop in the base rate will kick the summer off nicely and is just what the UK’s beleaguered borrowers need.
“I’m still not convinced the Bank of England will follow suit at the next meeting, but a cut is definitely coming. We may just have to wait a little longer.”
Adam Stiles, managing director at Helix Financial Partners said, “This is extremely welcome and positive news.
“We would expect this to give more lenders confidence, but in particular the SWAP markets to which fixed rates are pegged and priced by mortgage lenders.
“Hopefully this will lead to further stability in the run up to the General Election.”
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