The Bank of England has released a report outlining a worst-case scenario for the UK economy, predicting a potential 40% drop in house prices by the second half of 2025. However, this scenario is deemed highly unlikely by the bank, as it would require inflation to rise and remain above 10%. The central forecast from the bank is for inflation to decrease to less than 2% by 2025.
In an effort to combat high inflation, the Bank of England is set to raise interest rates to their highest level in 15 years on Thursday. However, there is some positive news for borrowers, as three major lenders – NatWest, Virgin Money, and Halifax – have announced reductions in the costs of home loans this week due to falling mortgage rates. This follows similar moves made by Nationwide, Barclays, TSB, and HSBC last week, reflecting an improving inflation outlook.
HSBC has reported impressive profits of £17bn for the first half of the year, more than doubling their profits from the same period last year. These results can be attributed to rising interest rates. The bank has also announced a $2bn share buyback in response to these exceptional results.
However, lenders have faced criticism from politicians and regulators for not raising rates for savers as quickly as they have for mortgage products. This comes at a time when borrowers are struggling to repay their debts.
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