New inflation figures showing a surprise fall last month to 2.8% boosted hopes of further cuts in interest rates.

Last week, the Bank of England held its base rate at 4.5% just a month after cutting it by 0.25%.

A majority of 8–1 of the Bank’s Monetary Policy Committee (MPC), including Governor Andrew Bailey (main picture), voted to maintain the rate.

Encouragement

But if inflation continues to fall, there will be more encouragement for the Bank to reduce the base rate further.

The Bank has set an inflation target of 2% as part of its strategy to steer the economy in the right direction.

Industry reaction

Nathan Emerson, CEO at Propertymark, says: “This news will provide relief to many homeowners considering both the domestic and international pressures that the UK economy is currently facing and shows that the Bank of England’s cautious path last week to keep interest rates at 4.5 per cent is providing stability.

“Many people approaching the housing market will likely feel a welcome degree of optimism, especially considering the spring and summer months tend to be the busiest times of the year for the housing market.”

We need decisive action to safeguard the economy and support the key drivers of economic growth – such as the property market.”

John Phillips, CEO of Just Mortgages and Spicerhaart, says: “Economists suggest September as the peak for inflation, and remain confident that inflationary pressures will eventually subside and return to the 2% target.

“As we’ve seen though, predicting inflation can be a fool’s errand – particularly in this economic climate.

“All eyes will be on the MPC to see how it responds to this changing picture,” he says.

“While its gradual and careful approach is important and works to a point, we also need decisive action to safeguard the economy and support the key drivers of economic growth – such as the property market.”