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UK Q4 GDP: What does this mean for interest and mortgage rates?

ended 15. February 2024

The latest GDP figures have just been released and show the UK economy contracted in the final three months of 2023. Gross Domestic Product, or GDP, fell by 0.3% in the last three months of 2023, more than expected. With the UK technically falling into recession at the end of last year, Newspage asked experts how this could impact mortgage and interest rates? Their views are below.

 

 

 

 

14 responses from the Newspage community

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Andrew Montlake
Managing Director at Coreco
It was no surprise to anyone who is in touch with the mood on the high street that the UK has fallen into a technical recession. Whilst shallow, it nonetheless shows how out of touch some of those in positions of power are to the realities of people dealing with higher mortgage and living costs, especially those on the MPC who bizarrely voted for a further increase in interest rates. This should serve as a further signal that rates are now too high and a cut should come sooner rather than later. This data could put some downward pressure on Swap rates, which would give lenders room to reverse the recent increases we have seen and mark a return to the January sales. The Bank of England, however, do not seem like they have the tenacity to lead, and are more likely to wait and follow others.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Although bad for the country, a recession needs to be addressed. The quickest way to stimulate the economy would be to cut interest rates. However, considering the US are unlikely to cut rates until the summer, it would need courage and heart from the Bank of England to move first. Unfortunately, history has shown us they have neither.
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Justin Moy
Managing Director at EHF Mortgages
While it is being called a ‘shallow recession’, it still highlights the decline in our economy that needs addressing immediately. Mortgage rates have have increased too quickly in a short period of time, and the Bank of England needs to intervene and bring base rate down sooner than planned to stimulate growth, given we are already half way through the first quarter of 2024. I would expect SWAP rates to start to fall on this news, which will be good for mortgage borrowers and businesses that are facing hard times financially. A boost to the economy only comes from having money in your pockets to spend.
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Bob Singh
Founder at Chess Mortgages
As expected, GDP fell in the last quarter of 2023, putting the UK into a technical recession. This will be a worry for the Bank of England and the Government and may come as a surprise for many consumers. This means interest rates may have to be cut sooner than later to keep the economy stimulated enough so the economic backdrop doesn’t worsen further. With an increase in mortgage arrears and repossessions, the Monetary Policy Committee need to ease the pain for homeowners by trimming rates earlier than planned.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
These figures are bad news for the economy and show the UK as a struggling economy among its global peers. On the face of it, a weakening economy should mean the central bank cuts rates sooner, which will filter into the mortgage market, but at the last meeting two of the cabal voted to raise rates further still. There is a long way to travel until rates are cut, and the delinquent Uk economy won’t force the central bankers to change course.
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Akhil Mair
Director at Our Mortgage Broker
Valentine's Day is officially over as the UK enters recession. Today’s announcement of a 0.3% fall in UK GDP for the October-December quarter, as reported by the ONS, is undeniably grim news for the nation. This expected decline presents significant challenges, especially for the Conservative Party and Rishi Sunak, as they navigate towards the upcoming election later this year. Sunak now, more than ever, must present a clear and decisive action plan to stabilise the economy and instill confidence among the populace. Reduce interest rates I hear echoing the walls of every household.
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Michelle Lawson
Director at Lawson Financial
Although this appears to be quite a shock to some of the economists, I’m personally not shocked at all. Many have said that the Bank of England went too hard with its rate increases without giving time to see the effects and maybe this is now coming home to roost. Their hand could now effectively be forced into rate cuts sooner rather than later. We can only hope this is shallow and short lived. A gloomy outlook on a gloomy day. When will the sunshine return as public patience and tolerance is wearing thin?
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Ben Perks
Managing Director at Orchard Financial Advisers
While interest rates are high in an attempt to reduce inflation, low growth is no surprise. So the UK has dipped into a shallow recession.
Hopefully this is the rock bottom, and those in power will act quickly to correct this course. Inflation has been the top priority for the Bank of England and this Government, but surely now growth must be high on the agenda and a base rate reduction should be on the horizon. If action is taken, this could actually turn into positive news for mortgage borrowers as prospects could soon improve.
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Craig Fish
Director at Lodestone Mortgages
This news comes as no surprise, but the good news is that it should be a shallow recession. This is likely to mean two things, incentives and tax cuts being announced in the Spring Budget, and an Autumn election for the government to buy themselves time, although I feel that time has run out. When the rate cuts come is the key thing, though. Let’s hope that for once the UK can find its own feet and make a bold decision rather than waiting on the US to move first and then follow like a sheep.
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Rohit Kohli
Director at The Mortgage Stop
I think everyone was expecting the UK to enter a technical recession, especially after the poor retail sales figures over Christmas. It’s not that people don’t want to spend, it's that they simply can’t afford to. With sky high mortgage payments, prices up by more than 20% over the last two years and taxes at an all-time high, a recession was always on the cards. Is it time for a rate cut? With inflation still twice the target that seems unlikely, so I am not expecting much change to mortgage rates yet. We now need to see how the markets react to this news.
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Emma Jones
Managing Director at Whenthebanksaysno.co.uk
It's never good news to see the word 'recession' but let’s hope the Bank of England now pays attention and cuts rates sooner. We may see reduced rates for borrowers coming through and, as advisors, we are still seeing a demand to move home. Interesting to see what will happen in the spring Budget only a few weeks away.
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Gary Bush
Financial Adviser at MortgageShop.com
Technical or not, a recession is a recession and the news this morning leaves brokers wondering how the hell did they get us here after pledging, a year ago, to bring growth back to the UK in 2023? It's been discussed for decades now that the United Kingdom doesn't produce enough goods in our slant towards the service industries, leaving us little activity to be able to hedge against the Gross Domestic Product statistics falling into recessions. Governments of all colours have long pledged to turn us back into an industrial creator in "Made in Great Britain" statements, however all they have managed to create, it seems, is a lot of hot air. It's clear to all that we need the government to ringfence our industrial activities, stop them from falling into overseas ownership, and drive forward home-grown growth in these sectors to leave us less exposed to overseas supply shortages, cost, and raw materials. The positive that can be taken from this is the likelyhood of lower mortgage rates.
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Ying Tan
CEO at Habito
The word "recession" is how many consumers have felt for sometime now, despite not technically being in one. HIgh Inflation, coupled with high interest rates, have taken their toll on the economy. Stimulating growth has to be high priority for the government whilst ensuring it is measured and sustainable. My feeling is that the recession will be shallow, and the sun will return in the spring.
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Amit Patel
Adviser at Trinity Finance
The MPC were hell bent on causing a recession and now they have 'technically' reached the point. The MPC must now cut the base rate to limit the damage otherwise we could spiral further into a recession.

Rishi Sunak's plan was to grow the economy, this was one of his key 5 pledges, it will be interesting to see how he gets himself out of this one.