Expert views on when a cut in the Bank of England’s base rate could appear

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However, the inflation drop was smaller than predicted, which means an interest rate cut might be pushed even further down the line, according to analysts. And with the country going to the polls in the summer, there is now even more uncertainty for those with a mortgage and people wanting to get onto the housing ladder, or move to a bigger property, as well as for savers and investors.

UK inflation dropped to 2.3 per cent in April, while commentators had forecast 2.1 per cent, which would have been nearer the Bank of England’s target of 2 per cent. And the Bank base – or interest – rate currently stands at 5.25 per cent, the highest level in 16 years, after it was held steady by the Monetary Policy Committee (MPC) earlier this month.

The MPC is due to announce its next decision on the base rate on 20 June and again at the start of August. Experts are divided on when – or indeed if – a cut is likely to be delivered, but many think the rate will be lowered at some point in the coming months.

Andy Bolden, Edinburgh-based financial planning director at investment service 7IM, says: “Although inflation is [nearly] back to target, it’s unlikely the Bank of England’s Monetary Policy Committee will want to jump ahead of a likely change of colours in government. If things do go as expected on 4 July, we may be back on course for slightly lower interest rates by year-end, but this Westminster hiatus will pause the potential for quicker reductions.”

Stephen McGee, chief executive of Scottish Friendly, says that anticipation is growing that a cut is just around the corner. “Inflation may be getting closer to where it needs to be to give the Monetary Policy Committee the confidence to loosen its fiscal grip,” he explains.

“Investment markets in the UK hit record highs as optimism around imminent rate cuts took hold. While optimism and strong market performance is always welcome, it shouldn’t be forgotten that the drop in inflation this week is a slowing in its rate of growth, and not a reduction in the cumulative effect it has already had on household budgets. It wouldn’t be surprising if there is yet more road to run and it may still be a bumpier journey than many people think.

“Predictions on the number of rate cuts that we will see in 2024 have been scaled back by most analysts of any note. Even so, it does seem that we may be emerging from the inflationary crisis and so the focus should shift to what can we learn and implement for the future.”

McGee adds that one thing to consider is whether the UK Government’s 2 per cent inflation target is a realistic one in this new economic context. “Does increasing the target upwards towards 2.5 per cent – or even as much as 3 per cent – create a much more achievable and sustainable long-term target and give the Monetary Policy Committee greater flexibility in how they respond to future economic challenges?”, he asks.

Darren Polson of Aberdein Considine says that while many are hoping for a base rate cut in June, he expects the MPC to delay until August when the inflation rate is expected to be below the 2 per cent target.

He adds: “We in the mortgage industry have been asking for support with first-time buyers which helps to accelerate the mortgage market and this support has been limited. We have seen lenders try this themselves with the 99 per cent mortgage from Accord and the Track Record mortgage offered by Skipton, although it is clear buyers of the future need more support.”

Over the last few weeks, various figures have been released that have shone a light on such areas as house price trends, mortgages and consumer spending.

The Halifax House Price Index found that Scottish house prices rose by 1.5 per cent year-on-year to stand at £204,579. Across the UK, house prices held steady in April, rising on a monthly basis by just 0.1 per cent. Annual UK growth rose to 1.1 per cent, from 0.4 per cent in March. The average UK property now costs £288,949, compared to £287,244 at the start of the year.

Barclays UK Consumer Spending Report found that overall consumer spending slowed down in April. It said that consumers made the effort to reduce discretionary spending ahead of summer. Cutbacks were seen in the food, drink and household categories, with the cold weather also hampering in-store shopping.

Commenting on the statistics, Christopher McColl, mortgage broker with Charles Cameron & Associates, says: “The latest house price data from Halifax suggests a housing market adjusting to a new normal. There’s also reason for cautious optimism among Scottish homebuyers – especially those looking to buy their first or next home this year.

“Meanwhile, Barclays’ latest consumer spending data shows that people were spending less last month. At the same time, spending on mortgage and rental payments rose 3.6 per cent in the year to April – though this is lower than the previous 12-months’ average increase of 6.5 per cent.

“This is all set to impact different groups of homebuyers in different ways. First-time buyers could find it difficult in the current rate market, but could benefit most from the modest house price growth we’ve seen over the last year.

“In the current market – assuming they can afford the rates on offer – they should think about moving fast as this modest growth may be temporary.

“If you’re planning on upsizing, it’s a mixed bag. The value of your home may have grown modestly, impacting the amount you could put down on your next home. However, the property you’ve set your heart on will also have grown only modestly in value, potentially making it affordable even with a smaller deposit – especially if your earnings have grown recently.”

He added that downsizers are the real winners. The average price difference between a detached property (£328,907), semi-detached property (£208,946), and flat (£152,613) in Scotland remains as significant as ever, according to Zoopla’s latest figures. “Empty-nesters with more home than they currently need could profit handsomely by trading down,” McColl says.

Paul Thomas, mortgage commentator with Mouthy Money, adds: “The soaring cost of living has hammered disposable incomes over the past 18 months, and we’ve seen Scottish households adapting to protect their standard of living. The data is showing us that they are spending less money on going out and more on essentials, which have rocketed in price over the past year.

“There is also evidence to suggest that rather than spending less on the weekly shop, they are trading down, buying own-brand labels instead of established brands.

“However, with wage growth vastly outstripping inflation, it remains to be seen whether Scottish households will loosen the purse strings going forward.”