Inflation fell by more than expected last month from 2.8% to 2.6%, and the new lower rate is good news for everyone hoping the Bank of England may cut interest rates.

The Bank held its base rate at 4.5% in March after cutting it by 0.25% the previous month, and it next considers the rate on 8 May.

A fall in petrol prices is being credited for the drop in inflation, but analysts are warnng this could be a temporary development, with the rate set to rise above 3% in coming months.

The inflation rate could even rise to as high as 3.7% later this year, and whilst the Bank may consider one or two interest rate reductions this year to help the housing market, it does have to keep control of inflation.

Industry reaction

Ben Thompson, Deputy CEO at the Mortgage Advice Bureau, says: “This might be the last good reading for a few months, so let’s enjoy it while we can. It’s likely we have a few bumps in the road ahead of us – especially before it feels like we’re seeing inflation back under control and where it needs to be.

“Getting inflation to the 2% target has been like the impossible task of putting toothpaste back in its tube, and that job is certainly not done yet.”

John Phillips, CEO of Just Mortgages and Spicerhaart, says: “While positive and better than many expected, it’s still hard not to see today’s news of another fall in inflation as a bit of a hollow victory, given that the new financial year brings new tax changes and price hikes which will undoubtedly add fuel to the inflationary fire.

“That’s not even considering any potential fallout from a tit-for-tat tariff war which rumbles on.

“What is good news is that a positive reading on inflation is likely to help influence the MPC’s decision next month on interest rates, as will the need to stimulate growth amid the threat of economic uncertaint,” he says.

“With expectations of a cut, we have already seen swap rates react favourably and lenders across the board announce reductions.”

Nathan Emerson, CEO at Propertymark, says: “Worries about the UK and the global economy in response to wider international events has provided a generally downbeat outlook for many consumers.

“However, today’s news will hopefully provide much welcome relief to many people considering taking advantage of the traditionally busy spring and summer months to purchase their next home.

“The overall question remains as to how much of an impact this drop in inflation will influence the Bank of England’s decision to potentially cut interest rate,” he says.

“If any decision to cut the base rate happens within the forthcoming months, this should hopefully lead to a variety of more competitive mortgage deals hitting the market and potentially inspire further market activity at a time when the economy urgently needs growth to help balance the country’s overall financial prospects.”