UK economic update Autumn 2023
Stronger signals that interest rates are nearing their peaks
Updated 18 October 2023
The key economic move over the last few months was the Bank of England’s decision not to raise interest rates in September. Keeping the rate fixed at 5.25% (still the highest rate in 15 years) was the first time the Bank’s rate-setting committee had not raised rates since November 2021, and it indicated that the Bank felt that inflation was starting to come under control. The official inflation data showed that the pace of price rises in the UK fell to 6.7% in August, down from a peak of 11.1% in October last year. Core inflation also fell back slightly in August. Inflation stayed pegged at 6.7% in September, a slight surprise to the upside. Core inflation ticked down again to 6.1%. The Bank’s rate setters will take this into consideration when it next meets in early November.
The central bank was careful not to rule out increasing interest rates again in the future, and economists believe that rates will stay elevated until well into next year before they start to fall back. There is an additional concern than increased geopolitical tensions could push oil prices higher, which would reverse some of the falls in inflation.
Slightly weaker economic data, both in terms of GDP growth and employment levels, also indicate that the Bank’s moves over the last two years are having an impact. The IMF released new forecasts indicating that the UK economy would grow by just 0.6% next year, which attracted some criticism for being too gloomy. But the Treasury’s monitor of independent forecasts showed that UK economists expect 0.5% growth in 2024. The IMF also said interest rates would stay elevated at around 5% until 2028, but some economists predict a rapid decline in rates in 2025.
Homeowners shifting off very low-rate fixed-rate mortgage deals agreed two, three or five years ago will also feel the impact of higher interest rates over the coming year. It’s estimated that 1.6 million homeowners will have re-mortgage, often paying a significantly higher monthly sum, this year alone. The Bank of England has calculated that around one million borrowers will pay an extra £500 a month on their mortgage by 2026.
The good news for borrowers is that there is increasing competition in the mortgage market, which is putting some downward pressure on home loan rates. Still, a return to ultra-low mortgage rates experienced between 2010 and 2021 at any time in the short or medium-term is very unlikely, which will put more pressure on some household finances through 2024 and beyond.
The information provided in this report is the sole property of Cluttons LLP and provides basic information and not legal advice. It must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Cluttons LLP. The information contained in this report has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. Cluttons LLP does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.
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Sales market sees values across all counties close to flat over the past year, with activity slightly down overall.Prime Central London review Q1 2020
Initial research suggests activity in Prime Central London (PCL) will be particularly affected by COVID-19, but discretionary buyers and sellers may help the market recover quicker than other parts of the UK.London residential development Q1 2020
The pandemic introduces additional risks to the Central London new build market, on top of its general impact.Residential London review Q1 2020
As COVID-19 stalls sustained price growth in Greater London, we review recent data indicating already decelerating growth in high-value locations.UK residential development review Q1 2020
As many sites’ shutdown at the start of lockdown, new build development is subject to the twin effects of an uncertain economy and the physical disruption.UK rental review Q1 2020
As new landlord instructions and rent expectation figures drop to their lowest ever levels, how will rents be impacted later in the year?UK economic outlook Q1 2020
Initial data measuring the economy post-shutdown suggested a large impact. But as the Coronavirus pandemic continues, the Government’s unprecedented response gives hope that that the outcome will be better than initially expected.UK residential sales review Q1 2020
At the end of 2019, the UK’s housing markets were starting to emerge from a long period of ‘wait and see’. By January, UK sales expectations were the highest they’d been since the end of 2015. But before the quarter ended, COVID-19 brought transactions levels to an immediate halt. Here, we assess the potential impact on housing throughout the rest of the year.Residential market outlook, September 2019
Price corrections leading to an increase in buyer enquiries.Residential market outlook June 2019
Brexit continues to dominate the headlines. Resilient buyers sought to close deals across the capital before the 29 March deadline, others are watching and waiting for a clarity and certainty that, despite the extension, remains elusive.The commercial connectivity impact report
The majority (65%) of the UK’s commercial landlords have undertaken work to improve the digital connectivity of their buildings, with almost three quarters (72%) of tenants saying that poorly connected offices will become obsolete spaces.London residential market outlook winter 2018/19
Cluttons has released its Winter 2018/19 Residential Market Outlook report.London office market outlook autumn 2018
ons has released its London Office Market Outlook report for autumn 2018, which looks at the health of the office sector by examining some of the key performance indicators.Autumn budget 2018
The Chancellor unveiled the 2018 Autumn Budget on 29 October, the last before Britain officially leaves the EU in March next year. In our response document, we present our view on some of the key announcements.London residential market bulletin summer 2018
London office market outlook summer 2018
Cluttons has released its London Office Market Outlook report for Summer 2018.The London connectivity report – part one: residential tenants 2018
Cluttons has published the first part of The London Connectivity Report, focusing on residential tenants, carried out in partnership with YouGov.