A leading economist has suggested that mortgage rates will not come down this year as the International Monetary Fund (IMF) announced that the UK has the worst growth prospects of any country this year.

Speaking to i about when the Bank of England’s base rate is likely to fall – which will trigger mortgage rates to go down – Paul Johnson, director of the Institute of Fiscal Studies said this was unlikely to happen this year.

“The base rate will fall, but the question is when, and it seems more likely that this will happen next year rather than this”, said Johnson.

“If the Bank becomes confident inflation will be under control we will probably get a reduction over the next couple of years… but that does depend on the Bank being confident that wages are fully under control, which it is clearly worried about”

He added: “Wages are rising quite strongly, which you would expect to feed through into inflation. Meanwhile we’ve got a fairly weak looking financial system and low growth. It’s a hard set of judgments for the bank to make.”

Washington-based IMF today announced its projection that the UK’s economy will shrink by 0.3 per cent this year, which, if correct, will make it the worst performing economy in the world – worse even than Russia’s, which rebounded slightly from last year.

Yesterday it published a blog saying that global interest rates are likely to return to pre-pandemic lows, but in the UK’s case this could take some time. The reason it saw interest rates going low again was down to low productivity and an ageing population.

Since December 2021 the Bank of England has raised rates from 0.1 per cent to 4.25 per cent in an aggressive attempt to dampen the worst inflationary pressures since the early 1980s.

The IMF’s research was based on the “natural interest rate”, which measures the level at which borrowing costs can keep inflation moderately low with sustainable unemployment and growth.

According to the IMF’s latest modelling, Britain’s natural rate of interest could decline to about 0.3 per cent by 2050, slightly lower than the 0.4 per cent estimated before the pandemic began in 2020.

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