A UK inflation dip has been reported by the ONS
For the first time in three months, UK inflation has shown a modest dip, according to the latest figures from the Office of National Statistics (ONS). The Consumer Prices Index (CPI) rose by 2.5% in the year to December 2024, a slight reduction from November’s 2.6%. While a 0.1% drop may not sound seismic, it’s enough to reignite debates about the trajectory of the UK economy and the implications for mortgage holders. As mortgage brokers, we at Oportfolio are confident in the new inflation data and we think that this is a positive sign of things to come for mortgage rates in the near future. In this blog I will explore the new UK inflation dip data and give my thoughts on what this could mean for mortgage borrowers.
What Happened Before The Recent UK Inflation Dip
This latest data offers a momentary reprieve after a turbulent year for inflation. The figure had briefly touched the Bank of England’s 2% target in September 2024 before climbing again, driven by volatile energy prices and ongoing supply chain disruptions. With the annual inflation rate consistently exceeding expectations in recent months, this December dip is a welcome change. However, perhaps we shouldn’t celebrate just yet. Core inflation—which excludes volatile items such as food and energy—still stands at 3.2%, down from 3.5% in November 2024. While the headline CPI figure has improved, the persistent strength of core inflation suggests that pressures on the economy are still very much there!
Mortgage Market Implications
This shift in inflation comes against a seemingly continuous backdrop of mortgage market turbulence. The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.5% in the 12 months to December, unchanged from November. Notably, the owner occupiers’ housing costs (OOH) component surged by an eye-watering 8.0% in the same period, marking the highest annual rate since 1992. For homeowners and prospective buyers, this is deeply concerning.
Despite the slight dip in inflation, it’s far from certain that the Bank of England will ease up on its stance. The base rate, currently standing at 4.75%, has risen steadily throughout 2024 in a bid to tame inflation. While markets had been bracing for another hike in February 2025, this new data could complicate the picture.
However, caution is warranted. The ONS figures indicate December’s decline in inflation is likely to be short-lived. With inflation expected to edge up again in the coming months, any hopes of a pause in rate hikes may be premature. This could keep mortgage rates elevated, prolonging the financial pain for households already grappling with higher monthly repayments.
Why Consulting A Mortgage Broker Is Crucial
With inflation fluctuating and the Bank of England’s next moves uncertain, mortgage rates could shift dramatically in either direction. Fixed-rate deals, once a no-brainer, may no longer be the best option for everyone. Similarly, variable-rate products come with their own risks in a volatile market. This is where the expertise of a mortgage broker becomes invaluable. Brokers like ourselves at Oportfolio can provide tailored advice based on your circumstances, ensuring you’re not only securing the right deal but also safeguarding yourself against potential future rate hikes. Call our team today to see how we can help.
