Following the Bank of England’s (BOE) recent base rate cut of 0.25%, Capital Economics chief UK economist Paul Dales has stated that interest rates are still due to drop to 3.5% by the start of 2026.
This is in spite of the uplift in public borrowing and spending by Chancellor Rachel Reeves following last week’s Budget which, the BOE believes will increase inflation by approximately 0.5%.
So, whilst a further interest rate drop this year is unlikely, cuts will continue throughout 2025 and into 2026. With mortgage rates likely to follow suit and the cost of personal borrowing falling, more buyers & sellers will be tempted to dip their toe in the market.
Plus, the financial strain on some landlords will ease. This means they will be more likely to continue letting out properties rather than sell up, which would otherwise have the effect of exacerbating the chronic undersupply of properties that already exists in the private rental sector.
