Your support helps us tell the story.
According to most polls, this election remains tied. In a fight with such narrow margins, we need journalists on the ground to talk to the people Trump and Harris are courting. Your support allows us to continue sending journalists to the story.
Every month, 27 million Americans across the political spectrum trust The Independent. Unlike many other quality news outlets, we choose not to exclude you from our reporting and analysis with paywalls. But you still have to pay for quality journalism.
Help us continue to bring these critical stories to light. Your support makes all the difference.
UK interest rates will be almost halved from their current rate of 5 per cent, according to leading US investment bank Goldman Sachs.
Borrowing rates, set by the Bank of England, will fall to 2.75 percent by the end of next year, Goldman predicts, suggesting a faster fall than borrowers and lenders have forecast.
Falling rates will be good news for mortgage borrowers who have had a tough couple of years, although savers will be hit again.
Central banks often use interest rates as a way to reduce inflation, since more costly borrowing reduces demand.
Financial markets currently suggest that the Bank will cut its rate to a rate of 3.5 per cent, but inflation in the UK has been brought under control more quickly than previously thought, with the price of goods now rising to 1 .7 percent annually – below the Bank of England's target of 2 percent.
This easing of pressure on living costs and a more relaxed stance from the Bank of England suggest faster rate cuts, Goldman said.
Goldman Sachs said “slow productivity growth, falling capital goods prices and an aging population” would keep rates low, while “sharp increases in public debt and a rebound in population growth ” would keep them above the lowest values.
The Bank of England raised interest rates to 5.25 percent last year, taking them to their highest rates since before the great financial crisis of 2007-2008. It then cut interest rates to 5 percent in August this year.
Commercial lenders use the bank base rate as a guide for how much to charge borrowers and how much to reward savers.
Mortgage borrowers' woes began two years ago after Liz Truss' disastrous mini-Budget, when her unfunded tax cuts sent shockwaves through financial markets and mortgage costs rose almost overnight.
The average two-year fixed-rate mortgage fell from 3.66 per cent to 5.24 per cent, according to mortgage brokers London & Country.
Any cuts in borrowing costs will also be good news for the Treasury and Chancellor Rachel Reeves, who is looking to borrow to invest, in an effort to grow the economy.
