There were 14 consecutive increases of base rate between December 2021 and August 2023 in a bid to slow runaway inflation. Since last August, it has held at 5.25%. At each MPC meeting, many have waited with bated breath for a long-awaited drop. However, hopes have been continually dashed with a slower than anticipated fall in inflation.
This is unfortunately the same story today. It was expected that inflation would fall from 3.2% to a much more comfortable 2.1% in April. Instead, it only fell to 2.3%. While it may not seem like a significant difference, that 0.2% could be the reason why base rate is held once again in June.
Nevertheless, despite inflation remaining higher than expected, it has still dropped to its lowest rate in almost three years. It may not be enough to change the base rate, but consumers will still feel financial strain ease slightly. This is especially true when it comes to energy and food costs, the former which has fallen by over 27% in the last year.
Of course, the question on a lot of people’s tongues is what does this mean for mortgages?
Speaking to our Managing Director of Mortgages, Thomas Jackson, it may be a little longer before we see a positive drop in rates.
“It is great news to see a good drop in inflation. However, SWAP rates will have considered the expected 2.1%, not the announced 2.3%. This unexpected rate is likely to cause SWAP rates to increase rather than decrease. Lenders may then follow suit and introduce small increases over the coming weeks after a period of reductions. This news, coupled with recent announcements that the cost of buying a home has hit an all-time high, means it’s likely to be a frustrating time for many.
“There was light at the end of the tunnel. With a lot of pressure on the Bank of England to decrease base rate and reach its 2% target, many predicted a drop would finally come in either the August or September MPC meeting. But, with the breaking news just in that there will be a General Election on the 4th July, it’s key to see how markets react to this and whether this puts any delays on the Bank of England to reduce rates.”
Whether you’re a homeowner or a prospective buyer, seeking advice in the first instance is vital. With economic uncertainty still rocking the proverbial boat, having an expert by your side to help you navigate the market can be reassuring. Contact our expert mortgage advisers today for fee-free, fuss-free advice.
