‘Welcome news’ for buyers as inflation rate drops

The rate of inflation slowed from 6.8% to 6.7% in August, providing hope for homebuyers when it comes to high mortgage rates.

Kate Steere, deputy editor and housing expert at personal finance comparison site finder.com suggested the surprise drop in inflation could mean that the Bank of England might finally pause its base rate hikes, with the latest round of interest rates due to be set today.

She said: “The UK housing market has been on its knees, with rent prices soaring, mortgage rates still pricing many out of the housing market, and buy-to-let demand crumbling due to falling profits. 

“In fact, research recently conducted by Finder found that yearly returns on the average buy-to-let property in the UK were over £4,000 lower in June 2023 compared to the same month last year. 

“However, mortgage rates have been coming down slightly, and a pause on interest rate rises could be just what’s needed to provoke more competition across the big providers, allowing for better rate options to enter the market.”

Lucian Cook, head of residential research for Savills,  added: “The surprise fall in inflation will be welcomed by both potential home buyers and those coming to the end of their fixed rate mortgages. 

“While rates have eased back a little over the past couple of weeks, mortgage affordability at the point of purchase is still heavily constrained acting as a drag on buyer’s budgets. 

“The inflation numbers should bring more economic certainty and confidence to lenders. This will give a further boost to competitive pricing in the mortgage markets and help buyers reliant on borrowing better compete with the cash buyers.”