The Office of National Statistics has released the latest figures from the Consumer Price Index, revealing that housing costs rose by 2.8% in the 12 months to May 2024, down from 3% in April.
L&C Mortgages Associate Director, David Hollingworth, said: “This moves a step closer to the point when the Bank of England could feel confident enough that inflation is coming under control, opening the door to a cut to base rate.
“Today’s figures are in line with market expectation, and few are anticipating that the Bank will feel the timing is right for an interest rate cut when the MPC announces its decision tomorrow.
It’s been a choppy backdrop for mortgage rates in recent months with fixed rates edging higher in May as markets anticipated that base rate would remain higher for longer. Market rates seem to have eased back again a touch in recent weeks to unwind some of the hikes.”
MPowered Mortgages Head of Product, Peter Stimson, commented on the irony of the situation: “For almost three years, high inflation has prevented the Bank of England from reducing interest rates.
“Now CPI is bang on the Bank’s 2% target, the Bank’s next step would ordinarily be to start easing the interest rate pain which has made mortgages more expensive for millions of homeowners and would-be buyers. But it’s unlikely to do so, as the inflationary block has morphed into an electoral one.
“While the Bank is independent of Government and not part of the Civil Service, it too is in de factor purdah – and cannot be seen to influence the election. The members of its rate-setting committee are therefore unlikely to cut the Base Rate tomorrow, even if they wanted to.”
Movera Chief Executive, Nick Hale, commented: “Inflation falling to the Bank of England’s 2% target is positive news for the housing market and for consumers. Though not everyone is convinced, this could lead to the Bank of England to hold or even lower the base rate tomorrow which has a direct impact on mortgage rates.”
“We’ve already seen mortgage rates fall this year, and whilst they are unlikely to drop below 4% any further decrease could still make buying a property more affordable, potentially stimulating buyer activity. This would be no small relief for both new borrowers, and homeowners looking to remortgage.”
“It will also be interesting to see how this interacts with the current election events with all major parties calling for action that will impact the housing market in the coming months.”
