As Inflation Falls to 3.2%, How Does This Affect the Property Market?

2024-04-22

This week the Office for National Statistics (ONS) released data showing that March’s inflation rate stood at 3.2%. In February it was 3.4%, again, lower than the Bank of England’s decision to maintain interest rates at 5.25%.

As inflation continues to fall and the UK economy maintains a path to recovery, the Bank of England is now in a position where it’s no longer obliged to pursue hikes in interest. This means the mortgage market is also showing visible signs of improvement.

In just the past few days, major lenders across the country have introduced a range of new mortgage deals, with First Direct, HSBC and Halifax just some of the banks now offering deals below 5%. As a result, property experts are claiming this is genuinely welcome news for prospective first-time buyers.

Matt Smith, Rightmove’s mortgage expert, said, ‘It’s positive to see inflation continuing to fall this morning, albeit not by quite as much as expected, as the blocks continue to build towards the anticipated first Base Rate cut later this year. The market is proving resilient despite broader global uncertainty, however, continued stability in mortgage rates should be seen as a positive outcome over the next few weeks.’

According to David Hannah, chairman of Cornerstone Tax, the ONS announcement is enough to give the Bank of England’s Monetary Policy Committee confidence ahead of their next meeting in December. It should, he said, allow them to prioritise first-time buyers by further reducing interest rates to 4.75%. This would mean the housing market recovering at the same time as providing greater opportunities to those seeking to leave the rental sector.

Hannah went on to say, ‘March’s inflation figures and mortgage approvals should indicate an overall cooling off of the UK economy. If we are to climb out of our current recession this year, then it must be acknowledged by the BoE and to avoid a sudden crash of inflation, will hopefully increase the pressure on the MPC to start reducing interest rates sooner rather than later.’

Sources: The Observer, City A.M.