High street lender Santander forecast that there would be around four base rate cuts over the course of the year, with the base rate standing at 3.75% at year end.
In an update, Frances Haque, Santander’s chief economist, said that swap rates had been edging up this month due to bond market volatility and an uncertain economic outlook.
Haque said that, consequently, lenders may “nudge up pricing to reflect the higher swaps” in the short term.
According to the latest figures from Chatham Financial, the two-year swap rate was 4.28% as of 9 January, which is up from 4.07% on 10 December.
The five-year swap rate was 4.15% as of 9 January and was 3.8% on 10 December.
Haque said all eyes would be on this week’s inflation and GDP data to give an indication of the Bank of England Monetary Policy Committee’s (MPC’s) decision around the base rate in around a month.
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“As it stands, with inflation proving to be more persistent, but with growth weakening, the MPC is likely to proceed cautiously. Our own forecasts continue to expect a further four cuts over the course of this year, with base rate ending the year at 3.75%, and remaining between 3-4% for the foreseeable,” Haque noted.
