The International Monetary Fund (IMF) says the Interest rates in major economies are expected to fall in the future because of low productivity and ageing populations.
From December 2021, the Bank of England has gradually increased interest rates, bringing them from 0.1% to 4.25%.
As a result, many homeowners now have higher mortgage payments.
In order to slow the rate of price increases, sometimes known as inflation, central banks in the US, the UK, Europe, and other countries have raised interest rates.
The UK’s inflation rate has reached its highest level in almost 40 years as a result of rising energy and food prices. Inflation is being fueled by a number of factors, including the invasion of Ukraine by Russia, which has increased energy prices.
The IMF, however, stated that “recent hikes in real interest rates are expected to be temporary” in a blog post.
It added: “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.” Real interest rates take into account inflation.
The IMF did not say, however, exactly when interest rates were set to fall back to lower levels.
Mortgage holders who are struggling financially won’t find much immediate respite from this IMF observation regarding lowering interest rates.
The research comes with a big caveat that it only applies until the current period of high inflation is past and only if governments manage their debts responsibly. According to the paper, interest rate increases following the epidemic “may be prolonged until inflation is brought back to target.”
The point is being made, nevertheless, that what we now see as the “normal” level of interest rates has decreased in sophisticated countries like the UK over the next years and decades.