Interest rates bombshell with forecast predicting two more years till they drop | Personal Finance | Finance

Interest rates will not start to go down until 2025, according to a new forecast.

This means mortgage payers face higher monthly repayments for at least the next two years.

Bank of England rate setters are likely to ‘err on the side of caution’ as they strive to bring down inflation and cut the cost of living, according to analysts Oxford Economics.

Andrew Goodwin, chief UK economist at Oxford Economics, said he had previously expected the Bank to start cutting rates from May next year, but now believed this would be delayed until the following year. 

“The Monetary Policy Committee (MPC) has a relatively pessimistic view of potential supply and is particularly wary of the inflationary implications of a tight labour market.”

READ MORE: Top 10 regular savings accounts offering interest rates up to 6.17%

Whilst Oxford Economics is forecasting a “modest rise in unemployment over the next year”, the group said it was “unlikely that we will see much spare capacity emerge”. 

“The stickiness of core pressures means we see headline inflation remaining above the two percent target until early-2025.

“And the persistent inflation overshoots of the past couple of years will still be fresh in the memory, not only for policymakers but also financial markets. 

“Against this backdrop, we think the MPC will err on the side of caution, waiting until it has strong evidence that price pressures are back under control before it considers loosening policy.”

It comes amid expectations that Threadneedle St will raise interest rates for the 13th consecutive time later this month, as it battles with stubbornly high inflation.

The Bank hiked the UK’s base rate to 4.5 percent last month and rates are currently at their highest level in almost 15 years. 

Another hike to at least 4.75 percent is widely expected when the MPC meets again on June 22.

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