The UK’s inflation rate has fallen to 2.8% in the year to April, according to the latest figures from the Office for National Statistics (ONS).
This represents a 0.5 percentage point fall from the 3.3% recorded in the 12 months to March.
Commenting on the latest data, Mortgage Advice Bureau director of home moving Ben Thompson said:
“Whether you’re looking to buy your first home, move up the ladder, or remortgage, a drop in inflation to 2.8% is certainly the news borrowers were hoping for. As inflation begins to ease, we could also see mortgage rates follow suit, helping to relieve some of the ongoing pressure on affordability and consumer confidence.
LSL Financial Services chief distribution officer Emma Hollingworth said falling inflation was both welcome and slightly surprising, but doesn’t believe that this will in any way alter the Bank of England’s thinking when it comes to interest rates.
“The central bank is walking a tightrope. If it does nothing, inflation risks becoming entrenched. But raising rates now would deflate an economy that outperformed all expectations in the first quarter and would heap pressure onto a struggling labour market.
“Barring a significant deterioration in the Middle East, we believe the Bank will keep its powder dry this year with regards to interest rates. Rates have already increased significantly, leaving borrowers confused about what to do next and when to act. Brokers who are being proactive with their clients now are the ones who will help them walk away with the best possible solution for their circumstances.”
Just Mortgage head of mortgages and protection Ben Allkins said: “Inflation easing in April certainly feels counterintuitive and is likely explained in part by the lowering of the energy price cap. I think if you speak to people in the supermarket or at the petrol pump, they’re certainly not feeling it as the Iran conflict continues put pressure on global supply and drive up prices. The impact on mortgage rates and broker workloads is well documented too.”
Allkins said that this pressure was still likely to be the norm moving forward, particularly with no resolution to the conflict in sight. “Attention will soon turn to the next base rate decision in a few weeks’ time with opinion still split on the outcome. Could a drop in inflation be enough to stave off any potential hikes for little longer – particularly with the unexpected jump in unemployment announced this week.
He added: “Across employed and self-employed parts of our business, we have seen clients getting on with the task at hand, which in many cases has meant pushing on with their remortgage. We are still seeing purchase activity, although it continues to lean more towards those needing to move, rather than wanting to. In both cases, it is an important reminder of why brokers are so important and the vital role we play in helping borrowers navigate the market. The priority right now is making sure we are being proactive, maintaining that five-star service and covering all our bases to ensure clients are properly supported.”
Phoebus Software sales and marketing director Richard Pike agreed that the surprise fall in inflation to 2.8% was good news for the economy and for consumers but was unlikely to be the start of a sustained fall and underlined just how unpredictable the current environment is. Inflation remains stubbornly high, with upward pressure from fuel and transport costs linked to the ongoing instability in the Middle East.
“At the same time, the labour market remains weak, and yesterday’s unemployment and wage data will make the Bank of England think very carefully about how far it can go in tightening policy without risking a deeper slowdown,” he concluded.
