Experts: Inflation falls less than expected, but enough for Rishi

Headline inflation fell to 2.3% year on year – the lowest level since July 2021– as the cost-of-living crisis begins to ease.

UK inflation graph

The rate of inflation dropped to 2.3% in April – down from 3.2% in March and the lowest level in almost three years, the Office for National Statistics (ONS) said this morning.

The drop in the consumer prices index was driven by amongst others falling energy and food costs. But while hopes of an interest rate cut from the Bank of England when it next meets on June 20 remain, some City analysts and other experts have already started to cut back their expectations.

Tom Bill, Knight Frank
Tom Bill, Head of UK Residential Research, Knight Frank

Tom Bill, Head of UK Residential Research at Knight Frank, says: “For anyone buying a property or re-mortgaging, today’s inflation data is not great news.”

He adds: “Stubborn services inflation is pushing the prospect of the first rate cut since March 2020 further into the distance, which will keep upwards pressure on mortgage rates.

Anthony Codling, Director of Research, RBC Capital Markets

“Combined with rising supply and a wave of owners rolling off sub-2% mortgages, it will maintain downwards pressure on house prices.”

Anthony Codling, industry data expert and RBC Capital Markets Managing Director Equity Research European Housebuilding and Building Materials, says: “UK CPI is moving in the right direction (down), but today’s print was higher than expectations.

“Rent inflation at 7.0% continues to be more than double the underlying rate of inflation, this means that the costs of living are rising much faster for renters than homeowners.”

Chief Executive of specialist lender Market Financial Solutions
Paresh Raja, Chief Executive, Market Financial Solutions

And Paresh Raja, Chief Executive of specialist lender Market Financial Solutions, says: “We are still not at a point where interest rates are going to be reduced significantly.

“Indeed, the Bank of England’s Deputy Governor has indicated that rates will be cut this summer but the journey to a more manageable base rate will continue for some time.”

But he adds: “With purchasing power now returning to a more normal level, the positive house price data that we have witnessed in the last week is likely to be compounded as more investors look to re-enter what is now a recovering market.”

Nathan Emerson, Chief Executive, Propertymark

Nathan Emerson, Chief Executive of Propertymark, was more sanguine and says: “It’s extremely positive to see inflation take a further dip downwards, after what has been an extremely challenging few years for many households.

“Over the coming months we are optimistic to see the Bank of England respond to today’s news by lowing the base rate. For many this will be a much-welcomed relief regarding household affordability and give people a new flexibility to approach the housing market with greater confidence.”

Tim Bannister
Tim Bannister, Director of Property Science, Rightmove

Tim Bannister, Rightmove’s Property Expert, says: “While today’s number is a little higher than economists forecast, it is a move in the right direction.

“It always takes time for people to feel the benefits of lower inflation, but the downward trajectory of inflation is good for the health of the market.

“Affordability has been tightly squeezed over the last couple of years as rates have gone up, however determined movers have continued to find a way.

“There are positive signs, including a stronger spring market than last year, however we still have more than half the year to go, and an election to come at some point, so it’s not smooth sailing yet.”

Ben Thompson, Mortgage Advice Bureau
Ben Thompson, Deputy CEO, Mortgage Advice Bureau

And Ben Thompson, Deputy Chief Executive at broker Mortgage Advice Bureau, says: “Inflation in April being just 0.3% above the Bank of England’s 2% target could be the spark to light the fire of the housing market.

“With inflationary pressures slowing closer to levels that the Bank of England are likely to be happy with, swap rates will fall further, and therefore those remortgaging or buying will see rates fall as a result.”

Alice Haine, Bestinvest by Evelyn Partners
Alice Haine, Bestinvest by Evelyn Partners

Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, the wealth manager, says: “Households can breathe a sigh of relief after the UK’s headline inflation rate tumbled to 2.3% in the 12 months to April – the lowest level since July 2021– as the runaway price rises that ignited the cost-of-living crisis finally beat a retreat.

“Core CPI inflation, which strips out more volatile items such as food, energy and tobacco, also eased, though less dramatically, to 3.9% in April, raising hopes that the Bank of England will push ahead with a rate cut in June.

All eyes are now pinned on next month’s interest rate decision.”

“With inflation now closer to the Bank of England’s 2% target, all eyes are now pinned on next month’s interest rate decision to see if the central bank will deliver more summer cheer with a rate cut.”

But she adds: “While the possibility of a summer cut is being floated by members of the rate-setting Monetary Policy Committee, whether it happens in June or August remains to be seen.”

One Comment

  1. 50% of the selling year has already passed, if BoE clips their rate, a slight dip in lending rates just in time for the holiday season is not great news, and it means that September might see an uptick, but then with a possible General election in November will that skew the market and make homemovers sit and wait. Fixed rate mortgages are going to be stuck in the 5% + zone for a long time that is the real issue.

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