Estate agents urge BoE to cut interest rates as inflation drops

The target for the headline CPI figure is 2% - set by the Bank of England and central banks across the world – and a drop to 2% had been widely forecast.

UK inflation graph

UK inflation fell to 2% in the year to May but chances that the Bank of England will reduce interest rates when it continues its meeting tomorrow remain extremely low.

The Office for National Statistics (ONS) said price pressures eased between April and May. The fall in inflation, from 2.3% in April, is the first time it has fallen back to the Bank’s target for the first time in nearly three years.


But Walter Avrili, Technical Direcrtor at broker Morgageforce, told The Neg: “Those hoping for a rate cut after multiple false hopes may still be disappointed.

“A cut from 5.25% to 5% would please the Rishi, but economists and financial markets are sceptical. Only 9% of the market expects a rate cut on Thursday.”

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

His comments were echoed by Ben Thompson, Deputy Chief Executive at Mortgage Advice Bureau.

“May’s inflation drop, in other circumstances, may have prompted some positive movements in the mortgage market.

“But, with rate cuts largely priced in, the Fed dragging its heels and a General Election in a matter of days, the Bank of England will be reluctant to make any waves”.

Jeremy Leaf
Jeremy Leaf, Principal, Jeremy Leaf & Co

Jeremy Leaf, north London estate agent and a former RICS residential chairman, adds: “Today’s announcement of a fall in inflation growth and previous drops appear to have already been factored into the expectations of many homebuyers.

“A cut in base rate had also been anticipated but now there is widespread acceptance that mortgage costs will stay higher for longer.”

Nathan Emerson, Chief Executive of Propertymark, was more upbeat about the prospects of a rate cut tomorrow.

Nathan Emerson, Chief Executive, Propertymark

“With inflation now back down to the levels initially targeted, Propertymark is extremely keen to see this now inspire a drop in interest rates when the Bank of England Monetary Policy Committee meet tomorrow,” he says.

And he adds: “Since the start of the year, we have witnessed many hints that rates may see a cut midyear and we now want to see this all click into place, with lenders bringing a new raft of competitive mortgage at the first opportunity.”

The target for the headline CPI figure is 2% – set by the Bank of England and central banks across the world – and a drop to 2% had been widely forecast.


Economists think the Bank of England will still want more evidence inflation is sustainably under control before cutting interest rates – with a hold at 5.25% widely expected tomorrow before a potential cut in August.

Anthony Codling, Managing Director, RBC Capital Markets

Anthony Codling, Managing Director RBC Capital Markets, says: “The market was expecting CPI to fall to 2.0% this morning, and expectations were met – no doubt the Government will be saying this is further evidence that the economy has turned a corner, while the opposition my point to the fact that inflation in services still needs to be tamed.

“RBC economists are not expecting a Bank Rate cut tomorrow (on the back of higher-than-expected services inflation), but we are a step closer, and we believe that today’s CPI print will be lowering the blood pressure and heart rate of the MPC members ahead of their rate setting meeting later today.”

Amy Reynolds, Head of Sales, Antony Roberts
Amy Reynolds, Head of Sales, Antony Roberts

Amy Reynolds, Head of Sales, at Antony Roberts estate agents says, “We are cautiously optimistic for the second half of the year. If the election results provide a clear direction, we anticipate a surge in market activity as delayed transactions are completed. Confidence in the market is likely to rebound, potentially leading to a stronger performance in the latter half of the year.

“However, we have concerns around landlords exiting the market. We are seeing an increase in landlords requesting valuations on their properties, as they prepare to sell if there is increased pressure on them from the new government.

Jeremy Batstone-Carr, European Strategist at Raymond James Investment Services
Jeremy Batstone-Carr, European Strategist, Raymond James Investment Services

Jeremy Batstone-Carr, European Strategist at Raymond James Investment Services, believes that although inflation has dropped to the Bank of England’s target, rate-setters may prioritise their political neutrality over a rate-cut in Thursday’s MPC meeting.

He says: “This morning’s data has confirmed that inflation has at last dropped back to the Bank of England’s 2% target for the first time since July 2021. Today’s outcome demonstrates that aggressive rate hikes have brought headline prices into check, without dampening economic activity too severely.

“Much of the drop in today’s inflation data is the consequence of abnormally large price increases from spring 2023 dropping out of the annual calculation. Nevertheless, the slower-paced increase in food prices will be welcomed by households.

Underlying price pressures are continuing to abate more slowly.”

“Underlying price pressures, which the rate-setters take most seriously, are continuing to abate more slowly given persistent strength in services inflation. Whilst the dip from April is encouraging, the fact that services companies are continuing to pass higher costs to customers may weigh on tomorrow’s much-anticipated rate decision.

“We won’t have long to wait to find out whether today’s data is sufficient to tip the scales in favour of a rate cut, or whether the central bank’s carefully nurtured independence might preclude any policy adjustment just two weeks away from the general election.”

Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners
Alice Haine, Personal Finance Analyst, Bestnvest

Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, adds: “Hitting the 2% inflation milestone will be a major moment for the Bank of England after a long, drawn-out battle to bring rampant inflation down from the double-digit levels seen just over a year ago”

But she says: “While the news will be comforting for households, it is unlikely to result in an immediate rate cut tomorrow as services inflation remains stubbornly high at 5.7% and core inflation, which strips out the more volatile items such as food, alcohol and tobacco, has eased but continues to sit above the 3% mark.

“This won’t bode as well as hoped for Prime Minister Rishi Sunak’s bid to secure victory at the General Election next month.”

Mark Harris image
Mark Harris, Chief Executive, SPF Private Clients

Mark Harris, Chief Executive of mortgage broker SPF Private Clients, says: “As expected, inflation has hit the 2% target, giving the Bank of England a further nudge to start reducing interest rates. If the Bank wants to be bold, that first reduction would come this month but more likely it will be August.

“There is a sense that some buyers and sellers are waiting for the first rate reduction before taking action, so a cut this summer could really give the housing market a boost.”

More to follow…

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