The Bank of England could cut the interest rate by 50 basis points and relaunch quantitative easing when the MPC meets on July 14, acording to Bank of America Merrill Lynch.
The swaps market is now pricing in a 15% chance of the base rate actually turning negative, a 50% chance of an interest rate cut in July, a 65% chance of a cut by August and an 80% chance of a cut by the end of the year.
Bank of America Merrill Lynch has said “We expect for them to cut interest rates 50 basis points at their 14 July policy meeting. We also expect the Bank of England to relaunch quantitative easing with a £50bn salvo; we pencil that in for August.”
Whilst research consultancy Capital Economics has added: “We think that a cut in interest rates in the near term looks likely and possibly even a restarting of the quantitative easing program.”
And Rosita Mendonca, marketing manager at Nova Financial, said its a good time for borrowers and a great time for firms to review their mortgage lending.
She said: “The UK mortgage market is bracing itself for a potential cut in interest rates as a result of the uncertainty after the historic EU referendum last week.
“Big names from all across the business world are predicting that the Bank of England will be cutting interest rates very soon. With some predicting that negative interest rates might even half to come to the rescue of the Bank of England.
“This is good news for borrowers, who can now expect lower interest rates in the near future. This all works because mortgage providers will pay less for the money they lend to consumers, as they borrow the money from the markets where rates are based on Gilts – or government bond – yields.”
Mark Carney came out after Thursday’s shock result with a statement to assure the markets that “The Treasury and the Bank of England have engaged in extensive contingency planning” and they “will not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward.”
Mendonca added: “After all the uncertainty in the markets of late, only one thing is clear. It’s going to be a great time to review your mortgage lending.”