The latest consumer price inflation figures from the ONS reveal the UK inflation rate has fallen by 0.2% to 3.6% in October, offering a boost to the housing market amid news of a slowdown in house prices.
The figures were met with widespread relief by property industry figures, with many saying the news justified the Bank of England’s recent decision to hold the base rate at 4%.
‘The news that inflation has fallen to 3.6% provides the housing market with a much needed shot of confidence, boosting hopes for a final base rate cut of the year in December’, said Ben Thompson, deputy CEO of the Mortgage Advice Bureau.
“This cooling of price pressures is the clear evidence the Bank of England needed. It removes the pressure for further rate hikes and shifts the conversation firmly towards when, not if, they can begin to cut the main interest rate.”
‘Today’s inflation data was pretty pivotal in proving the central bank’s point that inflation has indeed peaked’, John Phillips, CEO of Just Mortgages and Spicerhaart, agreed.
“No doubt they will be relieved to see CPI drop in October, as will households up and down the country who have faced considerable pressure, whether it’s at the petrol pump, the checkout or in their energy prices. Perhaps most pleased will be the chancellor just one week away from budget day.”
Lenders would also welcome the news, Phillips added, offering a boost to home movers.
“No doubt swap rates will continue to react favourably to this positive news, which will likely reflect in the activity of lenders across the market. This will be hugely welcome, particularly for those looking to get buying and moving plans back on track.”
Nick Hale, CEO of Movera, said the drop in inflation is a positive indication the Bank of England will cut the base rate further before the year is out – but warned budget measures could stifle the property market. He explained:
“What’s really important is that this budget considers the effect a further slowdown in property transactions might have. Implementing a ‘mansion tax’ or increasing stamp duty for part of the market, while many prospective buyers are already on pause waiting for better deals, would have a devastating effect on transaction volumes going forward, and the wider property sector.
“However, introducing another short-term policy – like stamp duty relief – could also hit the sector like a thunderbolt from the blue and lead to a sharp surge in purchases.”
Caitlyn Eastell, spokesperson at moneyfactscompare.co.uk, agreed that budget shocks could result in negative consequences for the housing market. She commented:
“Since inflation has fallen from this year’s peak of 3.8% during September, the Moneyfacts Average Mortgage Rate has fallen below 5%, which will come as a relief to many borrowers. There have been plenty of lenders dropping their fixed rate deals in recent weeks and by more significant margins, with more possibly on the way.
“A base rate cut in December is looking increasingly likely; with GDP growth slowing and unemployment rising, this has pushed swap rates near their 30-day lows and reflects the market’s confidence. However, if anything unexpected arises from the upcoming autumn budget, it could derail these chances.”
