The Office for National Statistics’ announcement that UK inflation has fallen to 2.6% has been welcomed by industry figures, although some predict the positivity will be short-lived.
Experts claim the 0.2% drop will offer some relief to potential home buyers, with broad agreement that the downward trend supports the expectation of a Bank of England rate cut in May. But despite the healthy short-term view, industry figures believe ongoing US volatility remains a threat to the market.
Ben Thompson, deputy CEO of Mortgage Advice Bureau, said of the cut:
“This might be the last good reading for a few months, so let’s enjoy it while we can. It’s likely we have a few bumps in the road ahead of us – especially before it feels like we’re seeing inflation back under control and where it needs to be. Getting inflation to the 2% target has been like the impossible task of putting toothpaste back in its tube, and that job is certainly not done yet.”
CEO of Just Mortgages and Spicerhaart John Phillips also welcomed the announcement, and said the increased competition among lenders was good news for consumers. ‘Even at a time of the year full of distractions and disruption, our buyer registration numbers, valuation requests and booked appointment numbers remain pretty robust’, he noted.
However, Phillips warned that the overall economic picture remains uncertain. He added:
“While positive and better than many expected, it’s still hard not to see today’s news of another fall in inflation as a bit of a hollow victory, given that the new financial year brings new tax changes and price hikes which will undoubtedly add fuel to the inflationary fire. That’s not even considering any potential fallout from a tit-for-tat tariff war which rumbles on.
“What is good news is that a positive reading on inflation is likely to help influence the MPC’s decision next month on interest rates, as will the need to stimulate growth amid the threat of economic uncertainty. With expectations of a cut, we have already seen swap rates react favourably and lenders across the board announce reductions. With so much in play and plenty of headwinds – both at home and abroad – it’s hard to predict with any great certainty how long this trend will continue. One of the biggest factors will continue to be the future path of inflation and how this shifts the bank’s expectations on future interest rates.”
“Worries about the UK and the global economy in response to wider international events has provided a generally downbeat outlook for many consumers. However, today’s news will hopefully provide much welcome relief to many people considering taking advantage of the traditionally busy spring and summer months to purchase their next home.
“The overall question remains as to how much of an impact this drop in inflation will influence the Bank of England’s decision to potentially cut interest rates. If any decision to cut the base rate happens within the forthcoming months, this should hopefully lead to a variety of more competitive mortgage deals hitting the market and potentially inspire further market activity at a time when the economy urgently needs growth to help balance the country’s overall financial prospects.”
Nick Hale, CEO of Movera, agreed the inflation dip was welcome news for home buyers, noting that it will help to tackle affordability issues. He commented:
“Today’s CPI inflation figures, which see a fall from 2.8% to 2.6%, are a welcome sign of progress. After a turbulent winter and an economic contraction in early 2025, any indication that price pressures are easing will be greeted with cautious optimism.
“While it is unlikely to shift the Bank of England’s (BoE) thinking on interest rates quite yet, a downward trend in inflation strengthens the case for a cut in the coming months, something that would certainly be warmly welcomed by homebuyers and homeowners alike, particularly as affordability remains one of the biggest barriers in the housing market.”
However, Rightmove’s mortgage expert Matt Smith warned that while consumers will benefit from the fall, the news was less positive for lenders.
He explained:
“Pricing changes can be painful for lenders, as they can quickly erode their margins, so they are looking at other ways to compete. We have seen a range of changes to criteria to help home movers over the last few weeks, including increasing maximum loan to income levels and reducing stress testing. This raft of activity comes on the back of the FCA – the financial services watchdog – encouraging lenders to look at ways to help consumers within the current regulation before a more comprehensive review kicks off in the summer.
“The narrative around tariffs continues to shift almost daily, so I’d still expect some caution from lenders. We’re now just over three weeks away from May’s Bank Rate decision, and as things stand it’s looking highly likely we’ll see a second rate cut of 2025.”
