UK Inflation Steady at 4%: Impact on Mortgage and Property Market

by | Wednesday 14th Feb 2024 | Mortgage News

UK inflation holding steady at 4%

UK inflation holding steady at 4% (Source: Consumer price inflation from the Office for National Statistics)

UK headline CPI inflation has maintained its position at 4%, in line with December’s figures, defying expectations for a rise to 4.2% according to many economists. The January 2024 data released by the Office for National Statistics (ONS) indicates a monthly price decrease of -0.6%, signalling some stability in consumer prices. A sigh of relief can be heard across the country this morning! UK inflation might be under control…at least for the time being.

Core CPI inflation, excluding volatile components such as energy, food, alcohol, and tobacco, has also held steady at 5.1% on a month-on-month basis. Meanwhile, CPIH inflation, which includes owner occupiers’ housing costs, remained at 4.2% over the 12 months leading to January, consistent with December 2023 figures.

ONS Statistics on UK Inflation

The latest statistics reveal a mixed bag of contributing factors. Higher gas and electricity charges have exerted upward pressure on inflation, while the cost of second-hand cars has also played a role. However, a notable decrease in food prices, marking the first month-on-month fall in over two years, has helped offset some inflationary pressures. The ONS reports a 0.4% drop in food prices from December 2023 to January 2024, bringing the overall food inflation rate to 8%, a significant decline from its peak of 19.2% in March of the previous year.

Additionally, the decline in prices for furniture and household goods adds to the picture of stabilising inflation. This data comes amidst the Bank of England’s efforts to curb inflation by raising interest rates, with the aim of bringing it back to the target rate of 2% (currently standing still at 5.25%). The Bank’s Monetary Policy Committee monitors core inflation closely, as it provides insights into underlying price trends. With core inflation remaining at 5.1%, below expectations, it suggests that price rises excluding energy and food have not accelerated as much as anticipated.

Looking ahead to the coming months, there are expectations for further adjustments in interest rates. Market forecasts seem to indicate a potential decrease to 5% in June, followed by reductions to 4.75% in September and 4.5% by December. However, these projections are subject to change based on evolving economic conditions and can never be 100% accurately predicted.

Potential Impact on the Mortgage and Property Market

The steady inflation rate could have implications for the mortgage and property markets. With inflation remaining at 4%, there may be continued pressure on borrowing costs. However, the stability in prices, particularly in key sectors like food and housing, could offer some relief to consumers and investors alike. Lower inflationary pressures might alleviate concerns for prospective homeowners, potentially supporting demand in the property market. Also, if interest rates follow the projected downward trajectory, it could incentivise borrowing for property purchases or refinancing existing mortgages.

Chancellor Jeremy Hunt’s Reaction

Chancellor Jeremy Hunt has expressed optimism regarding the inflation trajectory, noting progress in bringing it down from its double-digit highs. However, uncertainties persist, and policymakers remain vigilant in their efforts to navigate the economic landscape effectively. Hunt said “Inflation never falls in a perfect straight line, but the plan is working; we have made huge progress in bringing inflation down from 11%, and the Bank of England forecast that it will fall to around 2% in a matter of months.”

Speak To a Mortgage Broker in 2024

As the Bank of England continues to monitor developments closely, the implications for the mortgage and property markets remain contingent on a range of evolving dynamics. But one thing is clear and has always been clear that if you are looking to purchase a property, remortgage, or re-finance through a mortgage you must seek the help of a professional mortgage advisor. A mortgage advisor will help you to negotiate the mortgage market and get the best possible deal available. Call or message our team at Oportfolio mortgages today to arrange a fee free initial mortgage consultation. We are here to help.

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