Bank Of England’s Bailey Says He Expects Interest Rates To Fall ‘Gradually’
The governor of the Bank of England, Andrew Bailey, has said he expects interest rates to fall gradually but warned consumers not to expect a return to near-zero levels.
Bailey said he was “very encouraged” by the downward path of inflation and “therefore I do think the path for interest rates will be downwards, gradually”. Last week, the Bank kept borrowing costs on hold at 5%.
Bailey told the Kent Messenger he did not expect rates to return to the historic lows close to zero last seen four years ago, and his “best guess” was that it would settle “at a neutral rate”.
“My answer is I would not expect that because what caused interest rates to go that way it was, among other things, two very big shocks to the economy.”
Bailey’s comments are likely to disappoint mortgage holders who are on course to refinance their loans over the next few months and were hopeful that rates would fall quickly, as in the US where the cost of borrowing is expected to drop significantly over the next year.
UK banks are expected to engage in a mortgage price war as interest rates come down. Britain’s biggest building society, Nationwide, said this week that it plans to let first-time buyers borrow up to six times their earnings.