UK Inflation Rate Falls to 7.9% in July 2023

by | Wednesday 19th Jul 2023 | Mortgage News

In a surprising turn of events, the UK inflation rate has dropped to 7.9% in July 2023, marking a significant decrease from recent highs. It now stands at the lowest it has been in 16 months! The news comes as a relief to homeowners and potential buyers who have been grappling with soaring inflationary pressures, hinting at potential positive prospects for mortgage borrowers in the country.

UK Inflation Rate Falls

This recently announced decline in inflation has been welcomed by experts and policymakers alike, who have been working diligently to tackle the surging prices that have gripped the nation for the past few months. The moderation in inflationary pressures may pave the way for potential economic stability and relief for households struggling with increased living costs. But some will still argue that we aren’t out of the water yet and we could still see another base rate rise on the 3rd of August. Although any more sharp interest rate rises do seem less likely to happen.

The Bank of England, which has been closely monitoring the inflation situation, had previously warned about the risk of soaring prices impacting the economy and the financial wellbeing of UK citizens. Taking the necessary measures to control the situation, the Bank has managed to steer the economy towards a more favourable path, reflected in the latest inflation figures. The Bank of England has set a target inflation rate of 2%. Although inflation has dropped significantly in the past few months after a high of over 11%, the newly announced rate of 7.9% may still be too high to quash any more base rate increases.

What Could a Drop In Inflation Mean For Mortgages?

The drop in inflation could have various implications for the mortgage market in the UK. As inflation has been a key factor driving the increase in interest rates, the decline to 7.9% may lead to some respite for borrowers. With the inflationary pressures easing, the Bank of England might adopt a more cautious approach towards further interest rate hikes, which could translate into reduced borrowing costs for those seeking mortgages.

For existing homeowners with variable rate mortgages, the decline in inflation could mean a possible reduction in monthly mortgage payments if the Bank reduces the base rate. Many borrowers have been concerned about the impact of rising interest rates on their budgets, but the recent drop in inflation could potentially alleviate some of those worries.

New Home Buyers

Potential new homebuyers who have been apprehensive about entering the property market due to high inflation and the associated cost of borrowing, might also find themselves in a more favourable position. With the prospect of interest rates stabilising or even decreasing, the affordability of homes could improve, opening up opportunities for aspiring homeowners to step onto the property ladder. While the inflation rate falling to 7.9% is undoubtedly a positive development, it is still a very volatile mortgage market. The global economic landscape is subject to constant changes, and unforeseen events could impact inflation levels in the UK and abroad. That is why speaking to a mortgage advisor should be your main priority if you currently have a mortgage or are thinking of getting one.

Speak To a Mortgage Advisor

This recent drop in inflation is very welcome news to borrowers and brokers alike, but rates still remain high and could still rise if inflation does not continue to drop. You should always consult with a mortgage advisor if you are thinking of buying a new property or are potentially looking to remortgage within the next couple of years. Call our team today to see how we can help.

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