Expectations of an interest rate cut before the end of the year have strengthened after annual inflation came in lower than forecast.
The Consumer Prices Index (CPI) rose by 3.8% in the year to September, below most economists’ predictions. Following the data, analysts said a rate reduction could come at one of the next two meetings of the Bank of England’s Monetary Policy Committee (MPC).
While inflation remains nearly double the Bank’s 2% target, it is expected to ease further over the next two years.
A cut in the Bank Rate, currently at 4%, would offer some relief to mortgage borrowers facing higher repayment costs.
A 25 percentage point reduction would bring the base rate to 3.75%.
Martin Beck, at the consultancy WPI Strategy, said: “A November move looks off the table, but markets may be overestimating how long the Bank will wait.”
Aaron Strutt, product and communications director at Trinity Financial, commented: “I suspect the base rate will come down in December and if it does, then mortgage rates may edge down a bit.
“Normally when we are heading towards the end of the year some of the bigger lenders lower their rates to attract business and it may well happen again over the coming weeks.”
Sanjay Raja, chief UK economist at Deutsche Bank, added: “Big picture, the odds of a rate cut in the final quarter of the year have risen on the back of the data.
“And with chancellor Reeves laying the groundwork for lowering the cost of living in the upcoming Budget, we continue to think that a December rate cut is very much in play.”
The problem is not the BoE base rate, and until inflation drops back to 2%, a lower base rate is simply foolish.
The problem is that the average price of the average property in the UK is too high compared to the average wage.
In January 2007 the (CPI adjusted) average weekly earnings (AWI) was £513 per week. In August 2025 it was £528 per week. That’s a “real terms” increase of 2.9% or £65 per month or £780 a year.
Remember that’s an adjusted figure based around May 2015. Also, you should note that CPI ignores Housing Costs. If Housing Costs were to be included then it would be a decrease, not an increase.
Over that same period, the House Price Index for England & Wales has increased by 71.6%.
To put that into pound note figures, a property that is currently “worth” £300,000, would typically have been purchased for about £150,000 in 2007 assuming like-for-like condition.
Adjusting that for CPI gives a “real terms” value for the property of about £175,000.
That’s a “real terms” increase of about 16.7% in the cost of property compared to the above mentioned 2.9% increase in wages. Property prices have therefore risen just under 6 times faster
Wages can’t go up any more, even though they have been essentially stagnant in since the credit crunch, because the UK is not any more “productive” than it was. In fact, many of our industries are in retreat.
Reducing the base rate would have only one outcome. Property prices would increase even further and become even less obtainable for the average person.
The ONLY way to rectify this is to build more properties.
Why the only way? No downvotes please… It’s true, even if you don’t like it.
Because immigration is currently the only way for the country to grow and be more productive, but most people don’t want any more immigrants coming into the country. (This is a long recognised fact and one of the reasons why most governments actively encourage a net positive immigration level).
Ouch!
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