The chances of a US recession are growing and experts think this could trigger a domino effect, sending UK mortgage rates tumbling.

The US stock market took a tumble last week after disappointing employment figures. While things have steadied a bit, it’s got everyone on edge, especially the US central bank, the Federal Reserve.

When a country’s economy slows down (that’s a recession), central banks usually cut interest rates to encourage people to spend and borrow. The Bank of England already surprised everyone with a rate cut last week, dropping it to 5%. But now, some experts think the Fed might have to follow suit and slash US rates, which could spur our own Bank of England to go even lower next month.

Cheaper Borrowing on the Horizon?

“The chances of the Bank of England cutting rates in September have risen,” confirms Ruth Gregory, an expert at Capital Economics, speaking to Inews.

But why is this good news for you? Well, if the Bank of England cuts rates again, mortgage rates are likely to follow. Here’s how it works:

• Tracker mortgages directly follow the Bank of England’s base rate. So, a cut means your monthly payments shrink instantly! For example, a 0.25% drop on a £200,000 mortgage could save you a cool £30 per week.
• Variable rate mortgages could also see reductions, although that depends on your lender’s mood.
• Fixed-rate mortgages are where things get really interesting. These rates are influenced by predictions of future base rate changes. If the markets sense more cuts coming, fixed rates could fall even lower than they are now, potentially dipping as low as 3.5% next year.

Experts Divided on Impact

While some are already predicting significant drops, not everyone is convinced. Raj Badiani of S&P Global believes UK issues like inflation are more important than the US stock market wobbles.

However, David Hollingworth of L&C Mortgages suggests that if the US does slash rates, it could speed up the decline of UK fixed rates.