The property industry has reacted favourably to today’s surprise inflation news.
The headline rate of inflation defied expectations by dropping to 2.8% according to government figures released today.
It remains above the Bank of England’s 2% target, but is lower than the 3.3% figure recorded in the 12 months to March
Ben Thompson of the Mortgage Advice Bureau says: “A drop in inflation to 2.8% is certainly the news borrowers were hoping for.
“As inflation begins to ease, we could also see mortgage rates follow suit, helping to relieve some of the ongoing pressure on affordability and consumer confidence.
“Our research shows 41% of prospective buyers are currently waiting for a ‘sign’ before making their next move, highlighting how closely housing sentiment is linked to the wider economic picture.”
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David Hollingworth, associate director at L&C mortgages, comments: “The rate of inflation was expected to hold firm when compared with the jump that occurred last month, so an easing led by lower utility costs will be welcome.
“However, the ongoing conflict in Iran seems no closer to resolution and has been driving market anxiety that higher rates of inflation are here to stay.
“That in turn raises an expectation that interest rates will have to remain higher for longer.
“Mortgage rates have already reacted to that, and fixed rates are elevated compared to only a few months ago when further base rate cuts, not rises, seemed just round the corner.
“The peak of the initial spike in fixed rates has now eased and many lenders have made more than one cut to their rates in the last month.
“L&C’s remortgage tracker shows that the average of the top ten lenders’ best 2 year remortgage fixed rates has eased back to 4.78%, the lowest level since the end of March and well below the peak, which saw the average rate surpass 5%.
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Nathan Emerson, CEO of Propertymark comments: “It is very welcome news to see inflation dip this month; however, today’s figures still sit some distance away from the Bank of England’s target rate of 2%.
“It remains important to consider continued overall uncertainty and unrest globally, and the potential worries and anxieties brought directly into the homes of many consumers regarding their outgoings.
“It remains difficult to precisely foresee potential hurdles many consumers may face over the coming months.
“It is important that people consider real-world disruption, such as possible higher mortgage rates and increases in energy prices, as the year plays out.”
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Chancellor Rachel Reeves says “we have the right economic plan” following the fall in UK inflation rate to 2.8%.
“To change course now would risk our economic stability and leave working people worse off.”
Reeves says the Iran war is “not our war but one we will need to respond to” and says the decisions she took in last year’s Budget “have kept inflation down as we deal with global instability”.
