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Housing Market

BoE predicted to cut interest rates as UK economy nears “orbit of recession”

New polling reveals a shifting sentiment among economists, as house prices are projected to continue falling in 2024 in the wake of an affordability crisis
David Hannah, Group Chairman of Cornerstone Tax, urges the BoE to rethink its ‘hawkish’ macroeconomic strategy in a bid to get Britain

buying again 


"Forecasts from the UK’s top mortgage lenders, including Halifax, predict that house prices are set to continue falling by the end of the new year..."

David Hannah, Group Chairman

An annual polling of economists by The Times has revealed that a majority of the UK’s leading macroeconomic experts believe that the Bank of England (BoE) will cut interest rates at least twice by the end of 2024. The BoE’s consecutive decisions to increase the base rate of interest over the course of almost two years towards the current rate of 5.25% has resulted in a dramatic cooling of the UK economy. Since the beginning of 2023, the year-on-year inflation rate has dropped from 8.8% to 4.2% - edging closer and closer to the BoE’s target rate of 2%. Despite this, economists from across the country are now calling on the Monetary Policy Committee (MPC) to rethink their macroeconomic strategy, citing recession fears. David Hannah, Group Chairman of Cornerstone Tax, the UK’s leading property tax consultancy, discusses how a cut to the base rate of interest could be what’s needed to get Britain buying again. 

The UK’s housing market witnessed a tumultuous 2023, as sky-high mortgage rates continued to dissuade prospective buyers, house prices saw their fastest annual fall since 2009. Whilst the MPC’s decision to hold the interest rate at 5.25% in their previous three meetings provoked renewed confidence among lenders to slash their prices, experts are nevertheless projecting 2024 to be a difficult year for the British property market, with Halifax expecting a house price decline of 2-4% over the course of the new year. 

David Hannah has called on the BoE to urgently rethink its hawkish macroeconomic strategy, asserting that the UK economy faces a serious risk of further contraction if previous interest rate rises aren’t reversed. As the rate of inflation continues to climb down towards its 2% target, Hannah argues that the BoE should prioritise prospective buyers that have long-been dissuaded from entering the market as a result of unaffordable mortgage demands perpetuated by the central bank’s aggressive monetary policy.

David Hannah, Group Chairman of Cornerstone Tax, comments:
“Economies have momentum, with the rate of inflation continuing its downward trajectory towards the BoE’s threshold of 2% - the MPC must look ahead this year and start thinking about the optimum time to cut rates. Forecasts from the UK’s top mortgage lenders, including Halifax, predict that house prices are set to continue falling by the end of the new year, implying that prospective buyers will still be put off by high mortgage rates. I’d urge the MPC to seriously consider cutting the interest rate in their next meeting, even a reduction by a quarter percentage point would signal optimism within the UK economy, with a target base rate of 3-3.5% being the overall goal if the BoE want to truly prioritise prospective buyers in the new year."

David Hannah, Group Chairman
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