A decision by the Bank of England to lower interest rates to 4.5% is welcome news for the housing market in Northern Ireland, it’s claimed.
The reduction from 4.75% announced by the Bank’s Monetary Policy Committee (MPC), the latest since the rate hit a recent peak of 5.25%, will mean lower interest rates on mortgages and other borrowing, as well as on savings.
But the Bank also halved its growth forecast for this year and predicted a surge in inflation.
The UK economy is only set to grow 0.75% this year, down from a previous estimate of 1.5%, before accelerating again in 2026 and 2027.
Thomas Greenaway, associate solicitor at law firm O’Reilly Stewart Solicitors, which provides legal advice on home sales and purchases, welcomed the interest rate cut.
Thomas Greenaway, associate solicitor at O’Reilly Stewart Solicitors
He said: “Over the past number of months we have seen a gradual reduction of the Bank of England’s interest rates, which has been welcomed by those seeking to purchase property and those who have their fixed term mortgage periods coming to an end.
“While the local property market in Northern Ireland has remained strong, the announcement is a crucial factor in its performance going forward.
“From a conveyancing perspective the reduction in interest rates should reinforce confidence for both purchasers and sellers of property.
“As many contemplate their next property move it is also hoped that lenders will continue to pass this reduction on to their customers without undue delay.”
The interest rate hit a recent peak of 5.25% in August 2023, following a spate of increases in response to rising inflation.
Economist Richard Ramsey said the cut to 4.5% wasn’t a surprise, but he said observers were “taken aback” by the move by MPC member Catherine Mann to back a half-a-percentage point cut.
That would have brought the rate down to 4.25%, with her view contrasting with her reputation as “one of the most hawkish members of the MPC” and normally resistant to lowering interest rates, he said.
Richard Ramsey
Mr Ramsey added: “Besides the vote, the most significant piece of news concerned the latest Bank of England forecasts.
“Economic growth and inflation forecasts have moved in opposite directions. Rachel Reeves will be concerned that the spectre of stagflation – low rates of economic growth and higher rates of inflation – looms large.
“This presents a fiscal headache for the Chancellor as lower rates of growth will reduce the tax take and add to her existing public finance woes.
“Meanwhile the near-term inflationary pressures mean the Bank of England will not be able to lower interest rates as much and as quickly as would otherwise be the case.
“I expect the Bank of England will cut bank rate once or twice more later this year to 4.25% or 4.0%.”