Mortgage brokers have said that the economy contracting by 0.3% in October could see the Bank of England cut rates sooner rather than later, which will benefit borrowers and potentially boost the property market.
The Office for National Statistics said services output fell by 0.2% in October 2023, driven by a fall in information and communication, and was the main contributor to the fall in growth in GDP; this follows growth of 0.2% in September 2023.
It added that production output fell by 0.8% in October 2023, driven by widespread declines in manufacturing, after showing no growth in September 2023 — and that the construction sector fell by 0.5% in October 2023 after growth of 0.4% in September 2023.
According to Riz Malik, director at Southend-on-Sea-based R3 Mortgages: “These numbers are weaker than expected but weak numbers are what we need for Threadneedle Street to cut rates sooner rather than later. Sad news for UK Plc but potentially good news for mortgage borrowers.”
It’s a view shared by Justin Moy, managing director at Chelmsford-based EHF Mortgages: “This fall in GDP is bad news for the economy as a whole. The only positive is that it could see the base rate cut earlier than expected in an attempt to jump-start the economy.”
Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages, agreed: “The latest GDP figures show a bleak mid-winter for the UK economy. They reflect the continued cost of living crisis eroding people’s spending power and the current plight of many businesses. The only positive is that this should make a base rate hold decision from the Bank of England this month much more likely, meaning stability all the way through to the following review in February. The odds of a rate cut earlier in 2024 than originally expected have just shortened, which will boost sentiment in both the mortgage and property markets.”
Gary Bush, director at the Potters Bar-based broker, MortgageShop.com, said the news is saddening but should mean a pause at this week’s MPC meeting: “Saddening GDP figures from the UK this morning, and with rumours of slow Christmas trade in retail, it’s a disappointing situation all around. The only positive I can read here is that the Bank of England will be forced to pause again tomorrow lunchtime in its Monetary Policy Committee meeting.
Meanwhile, Craig Fish, director at London-based broker, Lodestone Mortgages & Protection, said the GDP print could see Bank Rate cut as early as Q1: “Whilst bad news for the economy, and sad news for so many businesses, this could be the gift that mortgage holders in the UK have been waiting for. A slowdown in the economy means that there is potential for those who set the base rate to consider cutting it sooner rather than later. We will still likely see a hold on Thursday, but the first base rate cut could come as early as the end of the first quarter 2024.”