Mortgage rates to fall as experts claim Bank of England nears end of interest hikes

Many other banks and building societies are expected to follow suit later this week.

Economists suggest the Bank of England will raise the base rate to 5.25 per cent on Thursday, however they believe that lenders will have already factored in the rise for fixed-rate mortgages.

Some experts predict the 14th consecutive rise could be the last following a larger than expected fall in the June inflation figure.

According to the Office for National Statistics (ONS), the annual rate of inflation fell from 8.7 per cent to 7.9 per cent from May to June.

Martin Beck, chief economic advisor at the influential EY ITEM Club, said: “On balance, the EY ITEM Club thinks the MPC will announce another rate rise.

“But a less significant inflation backdrop than of late means it’s now more questionable whether further monetary tightening is needed at all.

“At the very least, recent developments should give the MPC leeway to limit the next rise to 25 basis points, rather than repeating June’s 50 basis points increase – something which the markets had, until recently, anticipated.”

Over the past week half of the top ten mortgage lenders have cut rates as Barclays, HSBC, Coventry, Nationwide and TSB all announced that they are cutting costs across their range of fixed-term deals.

The rate slashing has increased the prospect of deals falling back below six per cent.

And with the end of interest rates rises in sight, there is also more optimism around house prices.

Riz Malik, director of mortgage brokers R3 Mortgages, said: “There is probably more life on Mars than there is in the UK housing market at the moment. But if interest rates have almost hit their highest point, things could start to improve.

“This week, some lenders have started to lower their mortgage rates marginally due to favourable market conditions.

“So, even if the base rate goes up next week, if the expectation is that interest rates won’t go much higher, we could start to see an increase in property transactions if the cost of borrowing improves.”

Andrew Goodwin, chief UK economist for Oxford Economics, added: “Beyond this month (August), we’re sticking with our prediction of another increase in rates in September, at which point the present rate rise cycle should come to an end."