Inflation Dips as Mortgage Market Recovers

Inflation Dips as Mortgage Market Recovers


The latest figures from the Office for National Statistics (ONS) indicate that the inflation rate for March was 3.2%, a slight decrease from February’s 3.4%.

This update comes after the Bank of England’s (BoE) decision to maintain the interest rate at 5.25%. With inflation showing a downward trend, there is less pressure on the BoE to implement additional rate hikes as the UK economy progresses towards recovery.

Following the BoE’s decision to pause interest rate increases, the UK mortgage market has improved which could mean good news for conveyancing and conveyancing solicitors. In the past week, major lenders such as Halifax, First Direct, and HSBC have introduced a variety of mortgage deals with rates under 5%. Coupled with a consistent year-over-year drop in house prices, industry experts are optimistic that conditions are improving for first-time home 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.”

Additionally, the latest House Price Index for February 2024 shows that average house prices in the UK decreased slightly by 0.2% over the past year to February but increased by 0.4% over the previous month. Prices for new-build homes have significantly increased, rising by 16.4% over the same period.

Commenting on the ONS House Price Index, Arjan Verbeek, CEO of Perenna said:

“House prices have continued to fall for the fifth month in a row, yet prospective homeowners continue to face immense pressure on affordability – reiterating that house prices are only one factor affecting would be homeowners’ ability to get onto the ladder.

The current mortgage market is very poorly suited to homeowners’ needs – dominated by two-to-five years fixes and hindered by an underwhelming lack of available alternatives. Making home ownership accessible will require structural reform – opening it up to new products, such as long-term fixed rate products, and amending regulation like the loan to income flow limit. If we are serious about improving access to homeownership, we cannot rely upon buyers waiting for house prices to fall – we must transform the mortgage market.”

Susannah Streeter, head of money and markets, Hargreaves Lansdown said that inflation in the UK has “taken another welcome step towards target”, but interest rate cuts “remain elusively distant”. She added:
“The drop was widely expected but was slightly less than forecast, with prices at the pumps offsetting a slowdown in food price hikes.

Although consumer prices are heading in the right direction, it’s not just the headline rate which determines Bank of England action. Policymakers scan other data, and the snapshot of stubborn wage growth out this week continues to be a concern. Unemployment may have risen, but the labour market figures are considered unreliable, and more people out of work isn’t yet translating into a sharp slowdown in wage increases, as there’s still a fight for talent in big pockets of the economy.

Although core inflation, which strips out volatile food and fuel prices is also cooling, slowing to 4.2%, the worry is that employers could pass on higher wage bills in the form of higher prices in the months to come. It means the interest rate may stay at a painful level for even longer than earlier forecasts, with August or September being increasingly pencilled in. Other central banks, particularly the Federal Reserve in the United States, are taking a cautious stance, staying committed to the fight against inflation. Fed chair Jerome Powell has warned that interest rates may have to linger for longer, with confidence ebbing away that the price spiral is being brought under control.”




Inflation Dips as Mortgage Market Recovers 1

Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.

Gill is a Multiple Business Owner and the Managing Director of Prof Services - a Marketing Agency for the Professional Services Sector.

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