Finance experts say the good news that the UK economy is ‘roaring back’ comes with a twist.
Evidence of strong growth in the economy may allow give experts on the Bank of England reason to hold back further cuts in interest rates, it is claimed.
That would potentially to push back cuts in the cost of mortgages, credit card and loan borrowing costs until November and beyond.
Today’s news that the UK’s Gross Domestic Product, the total value of the economy, grew by 0.6 percent in the second three months of this year has been widely welcomed.
As things stand, the UK is potentially on course to have the fastest growing economy in the G7 group of the world’s largest economies.
The fly in the ointment, however, is that this now gives the Bank of England’s Monetary Policy Committee (MPC) less of an incentive to cut interest rates, as the economy is doing well in a restrictive rate environment.
Wes Wilkes, chief executive at Net-Worth NTWRK, said: “The UK economy seems to be thriving rather than coping.
“This is certainly shaming our European neighbours and even giving our star spangled friends from across the pond something to think about.”
But, he warned: “As with every drama, there is always a second act. While this data and a growing UK economy in the second quarter overall is to be celebrated, this does give the Bank of England and the Monetary Policy Committee a lot of thinking to do and may be more reason to pause and wait before taking more action on interest rates. That could be a blow to borrowers.”
John Choong, Head of Equities and Markets at Investors Edge, said: “The UK economy continues to roar back to life after a harsh winter in 2024 saw the economy enter a recession. This puts Britain on track to be the G7’s star pupil, potentially outpacing even the mighty US economy.”
But, he also warned borrowers, saying: “This success story comes with a twist.
“The MPC might now be less inclined to ease up on interest rates. After all, there’s little to no reason to cut interest rates if the economy is already doing so well, with inflation just hovering slightly above its 2 percent target as well.
“Nonetheless, this leaves businesses and homeowners in a peculiar position of celebrating growth while having to brace for continued high borrowing costs.”
Ben Perks, Managing Director at Orchard Financial Advisers, told Newspage: “What a rollercoaster. From an economy in tatters and in recession a few months ago, to one of the strongest.
“Are we rising like a phoenix from the ashes or are our counterparts crumbling? It certainly doesn’t feel like we’re a world-leading economy, though, when we have borrowers struggling to get by.”
Ken James, Director at Contractor Mortgage Services, said he believes calls for the Bank of England to cut interest rates in September “will fall on deaf ears”.
