Interest rates could be cut later this year, which would be “massive relief for families with mortgages,” the Chancellor said.
“I would not like to predict an exact time but the Bank of England governor [Andrew Bailey] says he is optimistic that we are on the right track,” added Jeremy Hunt speaking on LBC radio this morning.
He pointed out: “It would be a massive relief for families with mortgages if they can bring them down. So, I hope that turns out to be the case.”
His comments come after the UK economy emerged from recession growing by 0.6% between January and March, the fastest rate for two years, according to Office of National Statistics data today.
Services lifted 0.7%, production lifted 0.8%, although construction fell 0.9% over the period.
This data comes as the average two-year fixed residential mortgage rose 1 basis point to 5.94% today from yesterday, according to Moneyfacts.
While the average five-year fixed residential mortgage rate fell 1 basis point to 5.50% over the same period.
This leaves the mortgage industry hoping for a cut from the base rate’s 16-year high this summer rather than the autumn, as the central bank improved its inflation forecast.
The Bank’s rate-setting Monetary Policy Committee said inflation is expected to return “to around the 2% target” throughout the second quarter, but to increase slightly in the second half of the year to around 2.5%, “owing to the unwinding of energy-related base effects”.
The BoE’s Bailey added: “We’ve had encouraging news on inflation and we think it will fall close to our 2% target in the next couple of months.
“We need to see more evidence that inflation will stay low before we can cut interest rates. I’m optimistic that things are moving in the right direction.”
