Inflation fell to 3.2% in March, according to the Office for National Statistics (ONS), down from 3.4% in February.
It’s the lowest rate of inflation since September 2021, but still less of a fall than had been expected, with economists predicting the Consumer Prices Index (CPI) would have dropped to 3.1%.
The news throws into doubt the likelihood of a rate cut the next time the Monetary Policy Committee (MPC) meets to discuss interest rates on 9 May. Although it’s widely expected that rates will still fall at some point this year, the possibility of multiple cuts has reduced.
What does this sticky inflation mean for mortgage borrowers? We looked at what the experts have to say:
Impact on the mortgage market
Richard Hayes, CEO at Mojo Mortgages, said: “Yesterday’s inflation announcement is already impacting how lenders will price mortgages in the future. Both Coventry Building Society and Principality Building Society have decided to increase their fixed mortgage rates.
“Whilst mortgage rates were tipped to fall in the next couple of months, it now seems that our initial hopes of a 3.5% fixed rate deal by late summer is unlikely to happen. Instead, we could be looking at that happening later in the year – or early 2025.
“So, if you’re set to remortgage or are planning on buying your first home in the next six months, I’d recommend speaking with a mortgage broker as soon as possible.”
Paresh Raja, CEO of Market Financial Solutions, agreed: “Inflation remains above the Bank of England’s target of 2%, delaying an eagerly awaited rate cut for another couple of months at least.
“The overriding sense is that the base rate will be cut in June, although all eyes are on the US Fed, with the Bank of England unlikely to act until cuts are made ‘across the pond’. Nevertheless, we are seeing that buyers, investors, brokers, and lenders within the UK property market are all gearing up for a more accommodative monetary policy environment.
“This outlook is positive, but the economic environment remains challenging. Today’s inflation data will continue to imbue the property market with a growing sense of confidence as the economic horizon brightens.”
Nathan Emerson, CEO of Propertymark, was more optimistic. He added: “It is encouraging to see that inflation is starting to decline towards the same levels it was at prior to the Covid-19 pandemic. People will be relieved to start experiencing some normality again without fearing that prices will rise at almost unaffordable levels.
“When the Bank of England meets in May, we may see them begin to have the confidence to gradually cut interest rates in order to stimulate activity on the housing market during spring, traditionally one of the busiest times of the year for the housing market.”
David Hollingworth, director at L&C Mortgages said: “The fall in the rate of inflation to 3.2% is another welcome step forward despite being slightly higher than some had forecast. Nonetheless it’s a step in the right direction towards the point when the Bank of England may begin to ease interest rates back.
“With a larger fall expected next month, some may be hoping a cut will come sooner rather than later. However, the bank is likely to take the threat of inflation remaining higher for longer seriously and has repeatedly suggested it won’t act until it’s sure that inflation is under control.”
