Interest rates are set to decrease at their fastest rate since the 2008 financial crisis, economists have predicted.
The anticipated figures would offer mortgage holders relief from years of sky-high borrowing costs.
Interest rates are expected to be cut from 4.5 per cent to 4.25 per cent by the Bank of England next week, The Times first reported, in the first of what could be a string of upcoming cuts.
The decreases could result in rates falling by as much as one per cent over the next half a year.
During the financial crisis, rates fell from 4.5 per cent in October 2008 to 0.5 per cent in March 2009.
Barclays has reportedly said it anticipated rates to fall to 3.5 per cent by September.
The bank, as well as HSBC and NatWest, have all cut mortgage rates this week by up to 0.25 percentage points.
Interest rates are set to decrease at their fastest rate since the 2008 financial crisis, economists have predicted (Stock photo)
It comes as global demand for British goods has suffered its biggest downturn since the height of the pandemic as Donald Trump’s trade war takes its toll.
The UK’s beleaguered manufacturing sector has now been shrinking for seven months in a row, according to figures from a closely-watched business survey.
It comes as speculation grows that the Bank of England will step up the pace of its interest rate cuts as
‘insurance against Donald Trump’s erratic behaviour’.
US investment bank Morgan Stanley is predicting five more cuts this year, taking Bank rate down to 3.25 per cent by the end of 2025 from 4.5 per cent today.
Yesterday, the purchasing managers’ index (PMI) figures for manufacturing gave a reading of 45.4 for April, the seventh month in a row that it has been below the 50-mark that separates growth from contraction.
In effect, the data shows Britain’s factories are in recession.
New export business fell at the quickest pace since May 2020, when the global economy was in the grip of the Covid pandemic, according to the survey by financial data firm S&P Global.
Orders from the United States, Europe and China fell, the PMI data showed.
‘Overseas demand is especially weak,’ said Rob Dobson, the director at S&P Global Market Intelligence.
He added: ‘Manufacturers noted that US tariff announcements were having a noticeable impact on global markets as trading partners adapt to increased trade volatility.’
At the same time, firms are being squeezed by Labour’s decision to hike employer national insurance and sharply increase the minimum wage.
Higher costs are resulting in higher selling prices and job cuts, with employment declining for the sixth month in a row.
Business confidence among manufacturers was at the lowest ebb since November 2022, in the aftermath of Liz Truss’s disastrous mini-Budget.
It is the latest sign that the UK economy, already reeling from Labour’s tax hikes, faces an even tougher time thanks to US President Trump’s tariffs.
