Interest rate cut hopes rise as inflation slows again

The rate of inflation slowed to 2.3% in April, Office for National Statistics (ONS) data shows.

It means the consumer price index or cost of living measure has fallen from 3.2% in March and is closer to the Bank of England’s 2% target.

This may raise hopes among agents and buyers that interest rates will be cut in the coming months by the Bank of England, bringing down the cost of borrowing.

Emily Williams, director of research at Savills, said: “The inflation figures will give the markets more confidence that a cut to the base rate is on the horizon. If this feeds through into mortgage pricing, we expect to see transactional activity start to pick up as it did at the start of the year. Mortgage affordability is the largest challenge currently facing buyers, with mortgage approvals in March 2024 23% below the pre-pandemic norm.

“Political and economic uncertainty means buyers will likely remain cautious, but the overall outlook has certainly improved, pointing to relatively modest house price growth this year. Savills revised forecast expects house prices to grow 2.5% in 2024.”

Nathan Emerson, chief executive of Propertymark, added: “It’s extremely positive to see inflation take a further dip downwards, after what has been an extremely challenging few years for many households. 

“Over the coming months we are optimistic to see the Bank of England respond to today’s news by lowing the base rate. For many this will be a much-welcomed relief regarding household affordability and give people a new flexibility to approach the housing market with greater confidence.”

The figure is not as low as economists had hoped but Tim Bannister, Rightmove’s property expert, said it is a move in the right direction.

He added: “It always takes time for people to feel the benefits of lower inflation, but the downward trajectory of inflation is good for the health of the market. Affordability has been tightly squeezed over the last couple of years as rates have gone up, however determined movers have continued to find a way. 

“There are positive signs, including a stronger spring market than last year, however we still have more than half the year to go, and an election to come at some point, so it's not smooth sailing yet."