Interest rates to return to pre-pandemic levels according to the IMF

Low interest rates, as seen before the pandemic, are set to return when inflation drops in the near future, according to the International Monetary Fund (IMF).

Many homeowners will be pleased to hear this news, having seen steep rises in mortgage costs in the last few months.

In an IMF blog yesterday, it was reported "Recent increases in real interest rates are likely to be temporary. When inflation is brought back under control, advanced economies' central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels.

"Since the mid-1980s, real interest rates at all maturities and across most advanced economies have been steadily declining. Such long-run changes in real rates likely reflect a decline in the?natural?rate, which is the real interest rate that would keep inflation at target and the economy operating at full employment–neither expansionary nor contractionary."

However, many are still predicting that current rates will become the "norm", with other factors such as the reversing of globalisation, record government debt, and the transition to a less carbon-intensive economy ensuring the rates do not return to the "ultra-low" levels we have enjoyed for the past few years.

One mortgage broker commented: "I appreciate that it's April but I thought jokes were supposed to stop on the 1st. We've spent the past six months talking about how it's unlikely we'll see super low-interest rates again for a generation, and most "experts" believed that base rates of around 2% make for a more effective tool to help manage the economy, providing capacity for central banks to move in either direction in short bursts. We will see rates reduce in time but I think this type of messaging can do more harm than good in the short to medium term as it could stop some of the green shoots of recovery we've seen in the property market recently as people pause or delay their purchases."

If you are concerned about the rising cost of mortgages, or you want to learn how interest rates will affect your borrowing ability, please call PKS - Mortgage & Insurance Experts on 01256 701205, or email [email protected].