The latest UK CPI data has been released this morning by the ONS revealing that headline inflation has now dropped to 2% for the year to the end of June – finally hitting the Bank of England’s target rate. Good news for sure.
But it’s not all good news. We can’t sit back with any confidence and expect an interest rate cut from the Bank of England MPC at its next meeting on 1st August. Why? As usual, it’s the print for core – or service – inflation – stubbornly stuck at 5.7% yet again this month which is causing concerns.
For mortgage and property professionals and their clients, what does today’s data really mean? Will it delay the expected cut to UK interest rates so desperately needed by consumers, businesses and borrowers in the fight against the cost of living crisis?
Mortgage and Property experts from across the industry have been telling us what they think today’s inflation data means for hard pressed borrowers and the chances of us seeing interest cuts soon as follows:
Nathan Emerson, CEO of Propertymark, comments: “The positive news from today’s figures is that inflation remains in line with the Bank of England’s target of two per cent, which means that consumers should not continue to witness the price rises we saw across 2022 and 2023.
“Although a further drop in inflation today would have been welcome by consumers, Propertymark is keen to see the Bank of England consider a dip in interest rates as soon as sensible. When the pathway to lower interest rates finally happens, we should witness a real boost in affordability and flexibility within the housing market.”
Stuart Cheetham, CEO of the lender MPowered Mortgages, commented:
“More than two years of bitter interest rate medicine have worked – Britain’s inflationary disease has been cured.
“Yes, some worrying symptoms remain. Both core inflation and service sector inflation remain high and today’s data is far from a completely clean bill of health.
“But the progress is real and the fact the headline rate of CPI has held steady at the Bank of England’s 2% target for two months in a row suggests the worst is past.
“So the Bank’s committee of ratesetters is now likely to turn its attention to the side effects caused by the prolonged dose of high interest rates.
“From squeezing consumer spending to pushing the dream of home ownership out of reach for thousands of first-time buyers, not to mention adding hundreds of Pounds a month to many homeowners’ mortgage repayments, the Bank’s battle against inflation has inflicted a high cost.
“While economists will argue about whether it’s too soon to declare victory over inflation, the case for holding interest rates so high is eroding fast – and the Bank is likely to reflect this at its next interest rate decision in a fortnight’s time.
“The first cut in the Bank’s Base Rate may be small in percentage terms, but it will be huge in symbolism. The speed and scale of any monetary loosening is still far from clear, but a gradual return to more normal interest rates will ease mortgage borrowers’ pain and inject much-needed vigour into the sluggish property market.”
Paresh Raja, CEO of Market Financial Solutions, said: “Borrowers have had to navigate the inflation storm over the past two years, but the past three months suggest it has been brought under control. This is good news for borrowers, and will likely provide prospective buyers with greater confidence in the second half of the year.
“Coupled with the arrival of a new government with a significant majority, there is a welcome sense of stability and calm returning to the property market. Indeed, lower inflation and less economic turbulence could prompt the Bank of England to finally cut the base rate in two weeks’ time, which would be another boost for borrowers.
“However, it’s crucial to acknowledge that the base rate won’t be cut as quickly or significantly as it was hiked. Brokers will need to support borrowers and manage expectations accordingly. Meanwhile, lenders should focus on offering a broad range of product types that enable brokers and borrowers to choose options that best match their needs and their own predictions for what the base rate will do over the coming months and years.”
Simon Webb, managing director of capital markets and LiveMore, commented: “Inflation has held at 2% in June, remaining at the Bank of England’s target. Whilst many hoped it would have fallen further, this stability offers a sense of predictability for the economy. For the housing market, this steady inflation rate means that interest rates are less likely to see sudden increases, which is particularly important for older buyers who often rely on fixed incomes and savings.
“Labour must take hold of this opportunity to address these underlying issues and support economic stability. By focusing on measures that can help keep inflation in check without stifling growth, we can create a more favourable environment for the housing market.
“This is especially crucial for older buyers who may be more sensitive to economic fluctuations and interest rate changes. Ensuring a stable and predictable economic environment will help maintain confidence in the housing market and provide security for older homeowners and buyers.”
Nick Hale, Chief Executive Officer at Movera, a group of home moving businesses including ONP Solicitors, said: “Inflation stalling at the Bank of England’s 2% target is still positive news for the housing market. Labour have inherited very favourable conditions with this lower level of inflation and this stability could even be enough to force the Bank of England to lower the base rate next month.
“It raises two questions: had Rishi Sunak held off on calling the election and waited for these conditions, would it have been such a landslide victory for Labour? And can Labour now harness these conditions to make the changes the sputtering housing market so desperately needs?”
Richard Pike, chief sales and marketing officer at Phoebus, said: “No change in the core inflation rate is great news for borrowers and lenders, as it will hopefully encourage the Bank of England to cut interest rates in August – despite services rates remaining fairly high.
“This will help reduce costs and stimulate the property industry and the economy in general. It will also support our new government’s growth plans – particularly around house building – that we will hear more about at the opening of parliament later today.
“I suspect, however, that by the end of the year we’ll see a slight rise again in inflation – but then it will hit a downward spiral again during 2025.”
