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IMF predict a return for low UK interest rates

In good news for many UK homeowners, the International Monetary Fund (IMF) has predicted a return for low UK interest rates

A photo of Dom Limberg, the author

By Dom Limberg

Published on: 11 April 2023

3 min read

IMF predict a return for low UK interest rates

In good news for many UK homeowners, the International Monetary Fund (IMF) has predicted a return for low UK interest rates.

A drop in interest rates should equal lower monthly repayments for people on tracker or variable rate mortgages. Those on fixed rates will be tied into their agreed rate of interest unless they choose to switch to a variable mortgage to take advantage of a drop in rates.

What is the International Monetary Fund?

In April 2023, the IMF have predicted ‘ultra-low’ rates should return to the UK, which will follow a fall in the high rate of inflation. This will be great news for any homeowners who have been struggling with an increase in monthly costs, due to the current high Bank of England base rate (4.25%).

IMF stands for the International Monetary Fund, and they work as a United Nations financial agency. They work to promote financial stability and economic growth for over 190 member countries including the UK.

They believe the high levels of inflation and interest we are experiencing in the UK are ‘likely to be temporary’, following Brexit and the Covid-19 pandemic. The IMF thinks that lower productivity combined with the average population growing older (ageing population) should work to decrease inflation.

If this happens, inflation (and interest rates) should push rates back towards pre-pandemic levels. With inflation brought back under control, interest rate will be able to stay low.

Generally, the IMF claims that the ‘natural’ rate of interest should be low for countries with advanced economies though of course this is not the case in the UK at the moment.

Benefits of low interest rates UK

There are some key benefits to people in the UK if interest rates drop over the course of this year. Interest rates affect many different products that involve borrowing money (or saving) including:

  • Mortgages
  • Credit cards
  • Loans
  • Savings accounts
  • ISAs
  • Car finance

If rates drop, all the above will be affected. This is great news for some products like mortgages, loans and finance where monthly repayments should then drop in price. Lower interest rates for things like savings accounts would equal less savings over time, as lenders would contribute less to your account in built up interest.

How will low interest rates impact mortgages?

Mortgages will be one of the main areas that will benefit from a fall in UK interest rates. This follows on from news that housing sales have dropped 40% since 2021 and mortgage repayments have increased by 60% on average.

Fixed rate mortgages won’t see changes to begin with as the rate of interest is set at a specified amount. Anyone with a variable rate mortgage could benefit as these mortgage interest rates can change over time.

Standard variable rate (SVR) mortgage rates can change at a lender’s discretion.Tracker rate mortgages will always change their interest rate in line with any changes to the Bank of England base rate.

This latest news is positive and hopefully will work to boost the UK mortgage market and make things easier for current mortgage holders or those looking to borrow soon. With the market having been so unpredictable over the last year, this ideally should provide much needed stability again.

Find out more about how to get the best rates for your mortgage in our guide ‘Find the right mortgage deals’.

Keep up to date with the latest mortgage and housing updates in our MPO News section.


Bank of England – Interest rates and Bank rate

House of Commons Library – Interest Rates and Monetary Policy

Statista – Quarterly development of mortgage rates UK 2000-2023

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