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Goldman Sachs 'playing crystal ball' predicting rates to hit 2.75% by this time next year

ended 21. October 2024

Lots of base rate predictions this week, It's 2.75% for Goldman Sachs and 3.75% for Santander. has made headlines with its prediction that interest rates could plummet to as low as 2.75% by this time next year. However, experts are skeptical. They accused the investment banking company of “playing crystal ball” and have called their predictions “the stuff of fairy tales”.

Newspage's experts have offered their insight into the big questions like what's going to happen to mortgage rates and house prices if the base rate does drop that far? And who will benefit from sub-3% rates and who will be dealt another hammer blow?

You can read their views below. 

11 responses from the Newspage community

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Ken James
Director at Contractor Mortgage Services
This sounds like the stuff of fairy tales. If they were the only ones making such predictions, you might wonder, 'What do they know that we don't?' However, they are not alone; HSBC is also suggesting that rates could drop significantly. This could be welcome news for the mortgage and property markets. While nothing is guaranteed, it offers a glimmer of hope that the market can maintain and build momentum and it's not all doom and gloom.

Of course, with every positive comes a negative, and in this case, it will be the impact on savers, who will once again be searching for ways to make their money stretch further.
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Dariusz Karpowicz
Director at Albion Financial Advice
Goldman Sachs is once again playing crystal ball, and the media is treating it like financial gospel! While their prediction of a 2.75% base rate by next year is certainly eyebrow-raising, we must remember that economic forecasting is often as reliable as British weather.

If rates were to drop that low, we could witness a property market revival that would make the Roaring Twenties look tame. Mortgage rates would likely follow suit, potentially sparking a buying frenzy and driving house prices up. First-time buyers might finally catch a break, while buy-to-let investors could be rubbing their hands with glee.

However, savers would be left out in the cold, watching their nest eggs gather dust instead of interest. In terms of investments, equities and real estate could thrive, while bonds may lose their appeal. But let’s not count our rate cuts before they hatch. If a week is a long time in politics, a year is an eternity in economics.
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Craig Fish
Director at Lodestone Mortgages
Goldman Sachs is way off the mark. If we see the base rate at 3.5%, we’ll be lucky. The Bank of England is likely to adopt a much more cautious approach to avoid repeating past mistakes. Reporting such predictions is irresponsible and only exacerbates the situation. Consumers may be tempted to wait or hold on to the hope of these low rates materializing, but that’s highly unlikely. Their decisions based on this misinformation could have serious consequences.
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Justin Moy
Managing Director at EHF Mortgages
At the moment, a drop to 2.75% feels quite distant. Achieving that would require some serious economic stagnation over the next 12 months. Unfortunately, the narrative around expected low rates in the mainstream media significantly influences mortgage borrowers who are looking for solid guidance in making their decisions, especially when Swap rates are on the rise and pushing fixed rates higher.

If it does happen, it would be fantastic news for borrowers. But if the rates are miles adrift off from these expectations, will the media feel responsible for the impact their headlines have on those borrowers?
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Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
With cuts on the horizon, Goldman Sachs has made a bold prediction that paints an enticing picture of the future economy. However, it’s wise to approach this forecast with measured skepticism, especially given the Bank of England's projections, which suggest a more gradual easing to 4.2% in 2025.

These differing views highlight the current unreliability of forecasts, with the inflation outlook being a key driver of base rate levels. While inflation has cooled significantly to its lowest level in three years, a mild resurgence is expected in early 2025, potentially moderating the pace of cuts.

Nevertheless, interest rates are generally trending lower into 2025, which could benefit certain sectors—such as property, utilities, growth-oriented companies, and small caps—that historically outperform in low-rate environments. However, this silver lining poses challenges for savers, who may find themselves squeezed in a lower yield environment, making diversification essential.
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Elliott Culley
Director at Switch Mortgage Finance
"This would be great news for mortgage holders, but I wouldn’t break out the champagne just yet. The market has experienced significant volatility, and predictions are just that—predictions. We've already seen how global events can heavily influence the current economic climate, and they could easily disrupt it again."
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David Belle
Founder and Trader at Fink Money
The Fed Funds rate is currently sitting at 3.46% prediction (325-350bps) for November next year.

So the market doesn't seem to think this is correct.
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Prem Raja
Head of Trading Floor at Currencies 4 You
Throughout 2024, Sterling has gained against its peers following relatively hawkish forward guidance from the Bank of England (BoE), with rates expected to fall in the UK at a slower pace compared to the U.S. and Europe. The tone on this has begun to change, with two more 25bps cuts expected between now and the end of 2024. However, the prediction of interest rates going as low as 2.75% in 2025 seems quite far-fetched. While borrowers would likely welcome this, and the housing market as a whole might benefit, rates dropping below 3% could be detrimental to Pound Sterling exchange rates and the UK economy overall, as it would represent too many cuts too quickly.

We could see GBP/USD below 1.30 again if interest rates fell this low, but with the Fed not expected to cut below 3%, I highly doubt we will see that in the UK as well. Our base case for 2025 is that interest rates in the UK will end up between 3.5% and 4%, which would be more beneficial for Sterling exchange rates.
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Elliott Benson
Owner at Sett Mortgages
Around the 3% mark sounds about right and we should see some stability for fixed rates as opposed to the stopping and starting rate drops and increases we are currently seeing.
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Iain Swatton
Director at Exemplar Financial Services
Goldman Sachs predicts rates could drop to as low as 2.75% by this time next year. Cue the optimists and pessimists! Borrowers will be doing cartwheels at the thought, while savers are probably groaning into their morning coffee. The cost of living crisis might feel like a double punch for savers as their returns shrink. But hey, there’s a silver lining—falling rates could boost confidence. The risk, though? We risk entering a "wait and see" phase, with people delaying decisions, holding out for that golden rate drop. There’s a lot of positivity, but let’s hope it doesn’t lead to excessive waiting.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
2.75% is well below the mean average for the Bank of England base rate over the past 25-plus years. While there may be a situation where it drops to that level, history suggests it would not remain there long term. However, it is important to note that mortgage rates and the Bank of England base rate are not directly linked; a drop to 2.75% in one doesn't automatically translate to a drop in the other. Currently, we have a base rate of 5%, with discussions of further cuts before Christmas. Meanwhile, mortgage rates are below 4% and appear to be rising, as many lenders have announced increases in their fixed rates over the past few days.