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Possible delays in rate cuts as GDP growth exceeds expectations
UK GDP grew 0.4% in May, prompting experts to suggest the Bank of England may delay a cut in its benchmark interest rate even further.
Second-quarter growth could match the 0.7% seen in the first quarter, despite early Easter disruptions and strikes.
Kevin Brown, savings expert at Scottish Friendly, said: “A rise in GDP figures for May is a welcome surprise at an uncertain time for the economy. However, stronger-than-expected economic growth will give the monetary policy committee (MPC) pause to think about the next step for rates.
“While inflation is more or less back on target, GDP growth will signal to the MPC that the economy is tolerating higher rates. This therefore dampens the impetus to start cutting and will not be what mortgage holders want to hear. This suggests that the timing of rate cuts may outpace a larger retreat from here, despite August expectations of a cut.”
“Economic progress, wage increases and a relatively strong jobs market will help families struggling to cope with higher borrowing costs. These types of benefits are not evenly distributed and many will feel the strain – especially those with renewals coming up. The important thing here is to speak to your mortgage broker or lender if your existing mortgage deal is coming to an end soon. Help is available to secure a new deal at the best available rate.”