‘Good news for buyers’ as inflation hits two-year low

The rate of inflation has fallen to the lowest level in two years, raising hopes of a boost for the property market.

Prices are still rising but the Office for National Statistics yesterday revealed that inflation has slowed from 6.7% to 4.6% thanks to falling energy costs.
It is the lowest level for the cost of living measure since November 2021.

Tom Bill, head of UK residential research at Knight Frank, said: “Cooling inflation is good news for anyone buying a property or re-mortgaging. The low level of transaction volumes means that lenders had already become more competitive and this will increase downwards pressure on rates. 

“Once there is a feeling of ‘job done’ for the Bank of England, and we are not there yet, improving sentiment will also help underpin activity in the housing market.”

Other responses were more cautious though.

Frances McDonald, director of research at Savills, said: “Whilst the inflation data came in below the Bank of England’s expectations, core inflation and wage growth remain obstinately high and so we’re unlikely to see a cut to the base rate before mid-next year, in line with our house price forecast expectations.”

Meanwhile, Danny Belton, head of lending at Mortgage Advice Bureau, said it could be a while before home loan deals drop below 5%.

He said: “The drop in inflation is good news for homeowners and prospective buyers and will reinforce the view that the worst of the interest rate hikes is behind us.

“Now we look to see how the Bank of England will react. The last time the rate setters met, we saw a second hold after a long upward interest rate cycle, but we may well be at the end of that. 

“Swap rates have been softening over the last few weeks, and this has prompted a flurry of lenders to reduce rates, with mortgage deals below 5% now available on the market - a sigh of relief for many borrowers.

“While it’s hard to predict what will come next without a crystal ball, significant cuts to the base rate are still unlikely in the near future. Despite inflation falling, it may be a while before deals drop far from current levels. For people considering their next mortgage move, it remains as important as ever to seek advice.