UK inflation has risen to 2.2 per cent in the 12 months to July, meaning this is the first increase of this year and taking it back above the Bank of England target.
Inflation is up from the two per cent figure that was recorded in May and June, and is the first time inflation has risen since December 2023.
Inflation had been steadily coming down this year and had hit the Bank of England target of two per cent- which has led economists to forecast an interest rate cut. A small increase had been expected due to energy prices falling, the drop was less than last year.
Nathan Emerson, CEO at Propertymark, comments:“The pathway to a strong and stable economy does come with ups and downs along the way, so today’s fluctuation, while disappointing, is an unfortunate but accepted part of the process. Households remain in a stronger position than only twelve months previous, but there is potential the Bank of England may reflect on today’s figures very carefully when the Monetary Policy Committee next meet to decide on interest rates. While Propertymark is keen to see a further lowering of interest rates, it’s essential to bear in mind this process must be carefully considered to keep the economy firmly on track.”
The ‘lag’ in ONS’s house price by two month has led the director at RAW to say he has taken the latest index with a ‘pinch of salt’.
Ben Nichols, Interim Managing Director at RAW Capital Partners, said: “We always have to take the ONS’s house price index with a pinch of salt, considering it lags two months behind the rest of the market. However, we can draw some positives from today’s figures, which underline that the market has performed solidly in the first half of 2024 despite ongoing economic challenges and the uncertainty created by the general election.
“But, in truth, it is the next three or four months that will be the most telling. With the Bank of England cutting rates last month and the new Labour government receiving a strong mandate to increase housebuilding and drive economic growth, the stage has been set for an uptick in market activity and potentially in house prices once the usual summer lull passes. Indeed, previously hesitant investors and homebuyers are likely preparing to re-enter the market, so we are expecting a surge in buyer and investor demand towards the end of summer and into the autumn.
“However, we have also seen this morning that there has been an uptick in inflation, which could delay any further rate cuts from the Bank of England. Therefore, for any surge in activity to occur, it’s crucial that brokers and their clients are provided with the tools they need to confidently execute their investment plans. So, lenders must continue to commit to offering a wide range of bespoke and flexible financial products to support the property market’s continued recovery.”
The market’s performance in the second quarter has sparked what financial bosses are calling a ‘growing optimism’ that the UK property market is starting to ‘gain momentum’ once more. However, the uptick in inflation reported this morning has given industry experts ’cause for concern’ and they have warned that lenders must ‘double down their support for brokers’.
Paresh Raja, CEO of Market Financial Solutions, said: “Today’s data reinforces the growing optimism that the UK property market is regaining momentum. Evidently, the market performed well in Q2 despite an approaching general election and the fact that the Bank of England had not yet cut rates.
“There are parallels between the performance of the property market and the specialist finance industry, which has seen strong activity throughout 2024, particularly in the bridging finance sector, where demand surged in Q2. The question is whether this progress will be sustained in the second half of the year.
“The rise in inflation reported this morning is a cause of some concern. Falling inflation would encourage the Bank of England to continue cutting the base rate, so a reversal of this trend throws up new questions about what the Bank will do. The important thing is that, as lenders, we do not let inertia set in – as uncertainly lingers over inflation and interest rates, lenders must double down on their support for brokers and borrowers to ensure the property market can continue the progress we have seen over recent months.”
