UK inflation fell to 2.6% in June, offering some welcome relief for borrowers and those hoping for greater stability in the mortgage market. With the latest figures likely to reinforce expectations that the Bank of England will hold the base rate at its next meeting, attention is now turning to what the easing inflation picture could mean for mortgage rates, remortgaging activity and buyer confidence.
Industry experts share their reaction to the latest inflation figures
“After remaining unchanged over the past two months, the latest data suggests inflationary pressures may be starting to ease, helped by lower fuel and food costs and a moderation in some services prices.
The figures will be welcomed by Andy Burnham and his new government as they look to create headroom for new initiatives and investment, particularly as recent borrowing data has shown some improvement.
That said, the outlook remains uncertain. Ongoing geopolitical tensions, particularly in the Middle East, continue to pose risks to energy markets and could put renewed pressure on prices in the months ahead.
Today’s figures are likely to reinforce expectations that the Bank of England will leave rates unchanged next week, although policymakers will want to see sustained evidence that inflation is moving back towards the 2% target before considering any further policy easing. If that downward trend continues, the prospect of a base rate cut before the end of the year becomes increasingly realistic.”
Richard Pike, sales and marketing director at Phoebus
“Inflation ticking down again is a reminder that in today’s geopolitical climate, mortgage rates don’t stay predictable for long. This drop puts the Bank of England’s next move back in the spotlight – albeit we currently expect no further increase to the base rate, as domestic economic performance still remains weak.
Whether you’re a first time buyer or a remortgager coming off a cheaper fixed deal, it’s worth exploring options sooner rather than waiting later to see what happens. For both groups, locking in a rate you’re comfortable with now is often a smarter move than waiting on the chance of a better one later.
Whatever the rate environment, a conversation with a mortgage adviser is one of the best investments a buyer and remortgage can make. Headline rates rarely tell the full story of what someone can actually borrow. We recently found 73% of first-time buyers don’t even realise 95% LTV mortgages exist, and half underestimate how much their borrowing power has improved. In a market that moves quickly, expert advice helps people make confident decisions rather than guesses.”
Ben Thompson, Director of Home Moving Strategy, Mortgage Advice Bureau
“While inflation easing may seem like the first win of the new Burnham premiership, it’s more likely to be a false dawn as improving food and fuel prices mask what is still a really difficult picture. In truth, many economists roughly expected today’s result and are already looking ahead to next month’s reading, which will take into account the higher energy price cap, as well as the re-escalation of the conflict in Iran.
Even with positive news today, a rate cut next week is far from anyone’s prediction. The most likely outcome is another hold, which will be certainly welcome over the other alternative. How long the central bank will keep to this path is yet to be seen, especially given what is happening in the Middle East – which has already helped push up swaps and forced many lenders to reprice.
For brokers in this current market, there is a real need to dig it out and make sure we’re maximising every opportunity that is in front of us. We know there will be those sitting on their hands and waiting to see what happens in the economy and with a Burnham government – particularly when it comes to stamp duty or any potential property tax. Equally there are still those looking to make moves, who need to sell or are fed up with the crisis fatigue. It means we have to stay on the front foot.”
John Phillips, CEO of Just Mortgages and Spicerhaart
