Inflation boost could be ‘starting gun’ for mortgage cuts

Falling inflation figures could be the ‘starting gun’ for mortgage rate cuts, a leading broker has claimed.

The Mortgage Advice Bureau predicts that lenders will be able to ease loan rates in the next few weeks.

Inflation fell to its lowest level in more than two years yesterday at 3.4%, increasing the pressure on the Bank of England’s Monetary Policy Committee to cut the base rate.

Speculation

The Bank is due to announce the result of the committee’s latest meeting today, with speculation that it will hold the rate again at 5.25%.

And Propertymark called on the Bank of England to cut interest rates after the latest inflation figures.

Inflation in February being just 1.4% above the Bank of England’s 2% target could be the starting gun we’ve been waiting for.”

Ben Thompson, Deputy CEO at Mortgage Advice Bureau (main picture), says: “Inflation in February being just 1.4% above the Bank of England’s 2% target could be the starting gun we’ve been waiting for, in terms of getting clearer visibility on exactly when base rate may start at last to come down.

“The last month has seen volatility in swap rates, with some lenders increasing their rates as a consequence,” he says.

“However, with inflationary pressures now easing, this could lead to an easing in swap rates and therefore the start of mortgage rates softening again.”

Deal cuts

NatWest has already announced that from today it will cut remortgage deals by up to 0.24%.

Matt Smith, Rightmove’s Mortgage Expert, says: “The inflation news is positive, and every day is one step closer to when we might see the first Base Rate reduction, and mortgage rates are likely to reduce before this.

“I don’t think this will change the course of the Bank of England’s decision on the Base Rate, but I expect both the Bank and home-movers will have some renewed optimism for the direction the economy and mortgage rates are heading in”.