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TODAY'S OTHER NEWS

Homebuyers facing 50-50 chance of August interest rate cut

HSBC has promised rate cuts this week as mortgage pricing continues to drop, but it is unclear how much further pricing will fall.

It comes as inflation held steady at the Bank of England’s 2% target last week, raising hopes of a cut to the cost of borrowing in the coming months – but recent economic data has caused concerns among analysts.

The average two-year fixed residential mortgage rate is currently at 5.88%, while the average five-year fix is at 5.47%, according to Moneyfacts.

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But there are warnings that an interest rate cut could come later than expected, which may delay further mortgage reductions.

Enrique Diaz-Alvarez, chief financial risk officer at global financial services firm Ebury, said: “Interest rate markets are continuing to price in a 50% chance of a first rate cut at the Bank of England August meeting. Last week's inflation data came up slightly higher than expected, but the impact on the pound was offset by disappointing June retail sales.

“All in all, the decision remains finely balanced, and there is likely to be heated debate among committee members as to the timing and pace of policy loosening.”

He said the firm is still pencilling in an August cut, but recent macroeconomic news has “shrouded this view in an element of doubt.”

Diaz-Alvarez added: “The main macroeconomic reference this week will be the PMI surveys, which are expected to remain consistent with healthy expansion of domestic demand.

“Generally resilient domestic demand and the prospect for better ties with the European Union following the election lead us to maintain an optimistic view on sterling, regardless of the Bank’s August rate decision.”

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