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Published on : October 17, 2024 09:40

Inflation falls to 1.7% – What could this mean for mortgages?

The Office for National Statistics (ONS) has delivered a welcome surprise with its announcement that as of September 2024, UK inflation has fallen to 1.7%. 

The ONS named lower airfares and petrol prices the main drivers behind the fall, which has helped drive inflation to 0.3% under the government’s 2% target – the lowest rate for three-and-a-half years. 

This has fueled speculation of a further drop in the Bank of England (BoE) Base Rate next month, but with uncertainty in the financial market over the upcoming Autumn Budget, it remains to be seen how the BoE will respond.  

What does this mean for families?

Although the price of long-haul flights had previously fallen after a seasonal summer rush, food and alcohol prices had remained stubbornly high. According to the ONS, September marked the first ‘strengthening’ of food price inflation since early 2023. 

This is good news for households, but it only tells part of the wider picture about the overall cost of living and its potential impact on borrowing. 

The Chief Secretary to the Treasury, Darren Jones, said the drop in the pace of price rises overall would be “welcome news for millions of families”.

“However, there is still more to do to protect working people, which is why we are focused on bringing back growth and restoring economic stability to deliver on the promise of change,” he added.

It is also important to remember that the drop in inflation does not mean that the prices of goods and services are falling overall, but rather that the rising cost of these goods is occurring more slowly. 

Additionally, with around 700,000 mortgages coming up for renewal* in the second half of 2024, many property owners will be more concerned about what might happen with Base Rates as a result of inflation. 

The potential impact on interest rates and mortgages.

Nobody can say for sure what will happen to mortgage rates in the coming months, however, the UK housing market has not only remained resilient during 2024 but even exceeded the expectations of many industry experts. 

The Zoopla October 2024 House Price Index revealed that the average UK house price increased almost 1% over the past 12 months, with this number increasing to 2.5% in more affordable areas. 

The report also noted that mortgage rates are at their lowest for 15 months, which has translated into an increase in sales activity with buyer demand and sales agreed up 25% since 2023.

This optimistic outlook has been bolstered by the most recent drop in inflation, leading many to believe that a further drop in the Base Rate is incoming. However, energy prices are set to increase this month by around 10%, which could have a knock-on impact on UK inflation. 

Additionally, the uncertainty around Rachel Reeves’s upcoming budget may well be enough to leave lenders feeling cautious in the short term until Labour’s newest financial policies are finally revealed. 

This means that while it could be argued that lower rates of lending will soon be announced, it is perhaps equally possible that mortgage rates will remain closer to their current levels while lenders take a ‘wait and see’ approach to the market. 

For property owners with fixed-term mortgages that are coming to an end, or buyers looking to move or purchase their first home, the best option is to contact a mortgage broker to seek expert financial advice and find the best possible deal on their new mortgage.

Talk to the Mortgage Experts Today

If you need mortgage advice, our friendly, professional brokers are waiting to hear from you.

We’ve been pairing clients with their perfect mortgage for over 40 years, comparing the latest rates of 50+ lenders to find the right one for you.

Contact us for a fee-free, no-obligation consultation using the link below. 

Contact Edward Mellor Mortgages

The figures in this post are correct as of the time of publication. This article is not advice. Contact a professional mortgage advisor for personal mortgage advice applicable to your circumstances.

Your home may be possessed if you fail to keep up with your mortgage payments.

* UK Finance – Household Finance Review 2024

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The Bank of England Holds its Base Rate at 5% | Mortgages | News

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