A cut in interest rates is certain next month brokers predict, after the latest figures on economic growth.
The economy shrank by 0.1% in May after also contracting in April, according to the Office for National Statistics (ONS).
Analysts were surprised by the fall in economic output, after expecting to see some growth.
Last month, Governor Andrew Bailey (main picture) and the Bank of England’s Monetary Policy Committee voted by six to three in favour of keeping the base rate on hold at 4.25%.
When the base rate was cut in May from 4.5% to 4.25%, that was the third reduction this year.
Reduction certain
Now, mortgage brokers say a further reduction is certain when the Bank next announces the rate on 7 August.
Rakesh Dua, CEO at DUA Accountancy & Business Consultancy, says: “The Bank of England is now far more likely to cut rates next month in an effort to address the downturn and boost sentiment among borrowers and businesses alike.
“Mortgage costs will come down and they need to given the pressure households are under.”
The odds of a rate cut will be slashed on the back of this news.”
And Adam Stiles, MD at Helix Financial Partners, says: “May’s bleak economic data could be good news for borrowers. The consecutive monthly contraction in GDP will be of concern to the Bank of England and the Government.
“The odds of a rate cut will be slashed on the back of this news.”
Death and taxes
David Stirling, Director at Mint Mortgages & Protection, says “a rate cut by the Bank of England next month looks as certain as death and taxes, but much more welcome”.
“All current data looks to be forcing Threadneedle Street in one direction. This will drive further competition between lenders, which can only be sunny news for borrowers”, he adds.