The property market welcomes news that inflation has fallen as it paves the way for better things to come!
The Office for National Statistics has just revealed that the UK inflation rate has fallen to 7.9%, the lowest in a year for the 12 months to June. It has fallen by more than economists predicted after inflation remained at 8.7% in April and May. Although the overall prices of goods and services are still rising, this is a sign that the rate at which this is happening is finally starting to slow.
The Chancellor, Jeremy Hunt, has welcomed the new figures but acknowledged that continuing rising prices “are still a huge worry for families and businesses”. He advised that there is still a long way to go, but the government remains committed to reducing inflation further.
How will the Bank of England react?
The drop in inflation is expected to ease some of the pressure on The Bank of England, which has increased interest rates 13 times since December 2021 in a bid to curb rates. Analysts are now predicting an addition of 0.25% to the base interest rate at their next meeting in August, bringing it up to a total of 5.25%. This is still an increase, but it is much less drastic than what was anticipated if inflation had not fallen.
What does this mean for the property market?
Any increase to interest rates will heighten the costs for borrowing, but for anyone concerned about rising mortgage rates, this news is encouraging. As inflation has fallen by more than expected, the Bank of England is less likely to heavily increase interest rates. This could provide the sign to lenders that they can begin to relax and in turn, start reducing their mortgage rates.
Insights from Home Legal Direct
The decline in the UK’s inflation has finally given the property market the good news it has been waiting for and is a sign of even better things to come. With inflation easing, the Bank of England now has the opportunity for less drastic interest rate rises moving forward. If this continues, lenders will naturally bring down their mortgage rates, making them more affordable for prospective buyers and those looking to remortgage.
Our COO at Home Legal Direct, Oliver Meddick, explains: This is positive news as it will give both the Bank of England and Lenders the confidence they have been looking for. I think we will start to see lending rates closer to acceptable levels that in turn will bring buyers back to the market!