The Consumer Prices Index (CPI) fell to 3.2% in the 12 months to March 2024, marking a slight decrease from 3.4% in February.
According to data from The Office for National Statistics (ONS), the CPI including owner-occupiers’ housing costs (CPIH) was recorded at 3.8% in March, remaining unchanged from the month prior.
On a monthly basis, CPIH rose by 0.6% in March 2024, compared with a rise of 0.7% in March 2023.
The largest downward contribution to the monthly change in both CPIH and CPI annual rates came from food, with prices rising by less than a year ago, while the largest, partially offsetting, upward contribution came from motor fuels, with prices rising this year but falling a year ago.
Reaction:
Lewis Shaw, owner and mortgage expert at Shaw Financial Services:
“There may be more mortgage misery on the cards after the latest CPI print shows the economy is still running hotter than expected.
“Robust wage growth, coupled with the CPI print, could easily push back any Bank of England rate cuts further into the year.”
Ranald Mitchell, director at Charwin Private Clients:
“The never-ending journey to destination 2% hits another bump, with inflation coming in slightly higher than anticipated at 3.2%.
“This will push that first rate cut further down the road, with its arrival looking more like the autumn than the summer now. Not the news we wanted.”
Craig Fish, director at Lodestone Mortgages & Protection:
“This is good news, but not as good as expected.
“With the energy price cap reducing in April, there is hope that this will feed through to the numbers we see in the next print, but with fuel prices rising at the pump again and wage inflation still not reading as the Bank of England want it to, there is diminishing hope of a rate cut in June.
“Swap rates and lender rates are ticking up again, so we are not out of the woods yet.”
Rob Gill, managing director at Altura Mortgage Finance:
“Hot on the heels of US inflation data being slightly higher than expected, UK inflation for March comes in at 3.2% versus expectations of 3.1%.
“The signs are increasing that the Bank of England will need to hold off on a first rate cut until later this quarter or even Q3. That may also apply to the US Fed.”
Charles Breen, founder at Montgomery Financial:
“As inflation falls further, if not quite at consensus, the imperative for the Bank of England is clear: cut interest rates now.
“Persistent high rates are no longer justifiable in the face of declining inflation and are only pushing more and more homeowners into financial distress.
“Lowering rates now is not just a monetary adjustment, it’s a necessary relief for households.
“The Bank of England were laggards in cutting rates as much as they should have when inflation began spiking, now let’s not see them make the same mistake again and delay making cuts when they are needed.
“The question is will they shirk their duty to the ordinary homeowner and stimulate the housing market back to life.”
Michelle Lawson, director at Lawson Financial:
“Although marginally higher than forecast, inflation is still moving in the right direction and that should be applauded.
“It will be interesting to see how the markets react and whether this forces the Bank of England’s hand to go it alone from the US and cut in the summer. Let’s see how lenders react to this print.”
Graham Cox, director at Self-Employed Mortgage Specialist SEMH;
“With analysts predicting inflation to fall to 3.1%, these are slightly disappointing results.
“A base rate cut in June is now less likely, though that could change next month when a lower energy price cap is expected to result in inflation falling sharply.”
Riz Malik, director at R3 Mortgages:
“The final push to the 2% inflation target will likely be the hardest.
“However, Andrew Bailey has highlighted that the UK and US’s inflation issues are different, signalling that a Bank of England rate cut ahead of the Fed may be possible.
“This is unlikely to move the property market but increases the likelihood of a cut at either the June or August meeting.”
Gary Bush, financial adviser at MortgageShop.com:
“The only way is down for the inflation data thankfully.
“Let’s hope that lenders see this as a sign to lower their fixed rates.
“Surely as the UK closes in on the Bank of England target it’s time for a much needed base rate reduction?”
Justin Moy, managing director at EHF Mortgages:
“While the inflation data is extremely encouraging for many reasons, with the slowdown of improvement this ‘Higher for Longer’ mood is only pushing up swap rates at the moment, encouraging lenders to edge up fixed deals.
“We are now in a game of ‘Who Blinks First’.
“Do we wait for the US to make a move or do we get brave and make the first move ourselves?”
Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial:
“Todays figures should be widely welcomed, and mortgage rates should fall soon, following any normal logic.
“Far from this rational world, the markets are expecting fewer rate cuts this year and for them to start later.
“The central bank seems set on stifling the economy to ensure the corpse of inflation receives one more bullet.
“As well as borrowers, it’s great news for everyone’s household finances in addition to business costs so will be widely appreciated.”
Rohit Kohli, director at The Mortgage Stop:
“Millions of borrowers will have their hopes raised of an interest rate cut this morning, as inflation fell to 3.2% last month, the lowest level for two years.
“But the fall was lower than expected so celebrations of a cut may need to be put on hold.
“Inflation in the US and wage growth in the UK are both running hotter than expected and with the Middle East on the brink of war, this will give the Bank of England plenty of reasons to continue with their overly cautious approach.
“Expectations of a cut in early summer are dwindling with markets now pricing in a cut later in the year, which is not what anyone wanted.”
Elliott Culley, director at Switch Mortgage Finance:
“Although there was a reduction in inflation, it came in slightly higher than predicted, which could lead to a delay in any base rate reductions and higher rates for longer.
“Not the news we wanted.”
Tobias Gruber, founder and CEO of My Community Finance:
“Many economists are anticipating that the Bank of England will cut interest rates later this year in response to falling inflation.
“This will likely drive down Annual Percentage Rates (APRs) offered by savings providers, meaning the deals currently available may soon become scarce.
“We’ve witnessed savings providers consistently reduce the interest rates available on savings accounts already this year, so savers must act fast to secure the best rates before they vanish.
“In addition to conventional savings accounts, it’s also important to explore alternative investment avenues for your money.
“Research a diverse range of products and don’t overlook credit unions, which often offer competitive rates that outperform those of traditional high street banks.”
Nathan Emerson, CEO of Propertymark:
“It is encouraging to see that inflation is starting to decline towards the same levels it was at prior to the Covid-19 pandemic.
“People will be relieved to start experiencing some normality again without fearing that prices will rise at almost unaffordable levels.
“When the Bank of England meets in May, we may see them begin to have the confidence to gradually cut interest rates in order to stimulate activity on the housing market during spring, traditionally one of the busiest times of the year for the housing market, especially when Propertymark’s own Housing Insight Report found that there has been an 18% increase in new properties coming to the market already.”
Nicholas Mendes, head of marketing at John Charcol:
“The consumer prices index dropped to 3.2% in March, the lowest since September 2021, down from 3.4% in February, though it was slightly higher than the 3.1% economists had expected.
“However, although inflation has fallen, prices are still rising compared with last year—just at a slower rate.
“Mortgage rates haven’t fallen as quickly as many anticipated following the early-year enthusiasm among lenders.
“While mortgage rates have declined from last year’s highs, many mortgage holders undoubtedly hoped for a more substantial reduction by now.
“Mortgage rates have been in a state of limbo in recent weeks, with each announcement related to inflation, job data, or other significant factors eagerly anticipated.
“Pressure will be on the Monetary Policy Committee (MPC) to implement at least two bank rate reductions in 2024, with the first coming by August at the latest.
“The MPC will want to avoid a bank rate reduction during a general election, which is being mooted for either October or November.
“The Bank of England is looking for signs that services inflation has weakened before it decides when it can start lowering UK interest rates from their current 16-year high.
“Financial markets are pricing in the first bank rate reduction in June, though there is an underlying concern that the MPC will wait for the Fed to make their move first.
“This is expected to happen in August, if not later, which could be disastrous for mortgage holders who may have to endure higher rates for longer than many deem necessary.
“Mortgage holders coming to the end of their fixed deals this year and in early 2025 will need to be prepared to see rates higher than early predictions.
“Initial forecasts of a 3.5% fixed rate by August to late September are very unlikely, with any sign of such a deal now pushed back to later in the year.
“While the temptation will be to wait and hold out for the best deal, it is strongly recommended that you speak with a broker so you can regularly understand the options available to you until your deal is due to expire.”
Mike Randall, CEO of Simply Asset Finance:
“As inflation falls for the second time running, hopes will now be set on more favourable prices and an anticipated drop in interest rates closely following suit.
“Considering the 10.1% inflation highs we faced in March last year, this downward trend is evidence the government’s 2% target is edging ever closer.
“Looking ahead, positive GDP figures at the start of the year driven by the services and construction sectors have hopefully set the scene for positive business growth in 2024.
“Not only this but renewed Government support in the Spring Budget, in the form of the Growth Guarantee Scheme, will have given smaller firms a much-needed boost in what have been trying times for UK business.
“Maintaining this trajectory for the rest of the year will require targeted business stimulus, particularly as low productivity remains the number one problem for smaller firms.
“Tailored and accessible funding, not just government support, will be the missing piece of the puzzle here to ensure firms have the financial resources they need for business critical equipment.”
Jonathan Bone, mortgage lead at Better.co.uk:
“Declining inflation is a win for first-time buyers and homeowners who are remortgaging this year.
“The Bank of England may now consider reducing the base rate sooner rather than later, which could give mortgage lenders an incentive to offer more enticing deals.
“Those looking to climb the property ladder may be hesitant to take the next step, hoping interest rates may fall, but there’s never a perfect moment to buy a home.
“Don’t let the pursuit of potential savings mean you miss out on your dream home – mortgage offers typically last between three to six months, giving you the flexibility to switch to a better rate if interest rates are cut later this year.
“For those needing to remortgage this year, you can speak to a mortgage broker up to six months before the end of your current deal to understand how much extra you need to budget per month on your mortgage repayments.”
Neil Rudge, head of enterprise at Shawbrook:
“While a dip in April’s inflation rate is welcome news, small and medium sized enterprises (SMEs) will remain cautious.
“High costs for materials and labour continue to squeeze profit margins, and the uncertainty surrounding future inflation makes planning for the coming year a challenge.
“While some inflation allows businesses to raise prices without significant resistance, potentially offsetting cost increases, a continued squeeze on consumer spending could dampen demand.
“To navigate this environment, SMEs should remain adaptable, focusing on operational efficiency to maintain profitability.
“Strategically adjusting prices to account for rising input costs while minimising customer impact will also be crucial.
“The impact of inflation will vary by industry and business model, but by staying informed and proactive, SMEs can emerge stronger.
“We’re seeing many still embracing their growth aspirations and exploring specialist funding options to secure capital for expansion in this inflationary environment.”
Nicholas Hyett, investment manager, Wealth Club:
“UK inflation is firmly in the slow puncture phase, and has been since the last quarter of 2023.
“Big falls are now a thing of the past, and unless there are some major external shocks – such as a spike in global energy and food prices – it seems likely to stay that way.
“Put that together with an economy which is showing some signs of weakness, and the evidence to support an interest rate cut is growing.
“It’s worth noting though that we seem to be shifting to a two speed global economy. The US continues to grow strongly while Europe and others are struggling.
“Given the disruption adopting a different interest rate policy from the US could cause to exchange rates that creates additional uncertainty. One to watch.”
Simon Webb, managing director of capital markets and LiveMore:
“At 3.2%, we are continuing the mainly downward trajectory of inflation rates that we have witnessed since the peak in October 2022.
“Imagine a bell curve. At 3.2%, March 2024’s inflation rate is around the same levels as Autumn 2021 when the rate of inflation rose from 3.1% in September to 4.2% in October.
“The difference is that those inflation figures were the beginnings of a sharp increase in inflation rates all the way up to the October 2022 summit of 11.1%.
“Although our current inflation rate remains way off the 2% goal, consumers can take some solace that inflation is largely on the descent this time round, and our economy does appear to be on the mend, slow though that process may be.
“Older borrowers and mortgage prisoners are continuing to feel the squeeze with the continuing high cost of living. People coming off an interest-only mortgage this side of summer will need to make sure they seek sound advice.”
David Hollingworth, associate director, communications at L&C Mortgages:
“The fall in the rate of inflation to 3.2% is another welcome step forward despite being slightly higher than some had forecast.
“Nonetheless it’s a step in the right direction towards the point when the Bank of England may begin to ease interest rates back.
“With a larger fall expected next month some may be hoping a cut will come sooner rather than later.
“However, the Bank is likely to take the threat of inflation remaining higher for longer seriously and has repeatedly suggested it won’t act until it’s sure that inflation is under control.
“Market expectation will be important in determining fixed rate pricing. Fixed rates have fallen substantially since last summer but have largely stabilised.
“With uncertainty still in the air as to how quickly base rate may fall, those holding out for further cuts may find themselves in for a long wait.
“The better approach could be to secure a rate now and keep a close review of movements before completion.
“A move to a better rate can still be made but a rate is already in place if things take a turn and rates edge higher.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“At 3.4% February inflation was the lowest it had been since 2021, and 0.2% lower than the 3.6% than economists had forecast.
“Today’s figure of 3.2% for March is another drop in the right direction.
“Unfortunately, though, with inflation high on both sides of The Atlantic, and swap rates behaving unpredictably, 3.2% is still not anywhere near where it needs to be to inspire a Bank of England cut in interest rates come May 9th.
“The rise in inflation in the US at 3.48% compared to 3.15% last month, has given the IMF and central banks cause for pause.
“I agree with Mary Daly, president of the San Francisco Federal Reserve Bank and one of the US central bankers who set monetary policy, who said last week, “The worst thing to do is act urgently when urgency is not required.””
Paresh Raja, CEO of Market Financial Solutions:
“Inflation remains above the Bank of England’s target of 2%, delaying an eagerly awaited rate cut for another couple of months at least.
“The over-riding sense is that the base rate will be cut in June, although all eyes are on the US Fed, with the Bank of England unlikely to act until cuts are made ‘across the pond’.
“Nevertheless, we are seeing that buyers, investors, brokers, and lenders within the UK property market are all gearing up for a more accommodative monetary policy environment.
“Lenders are constantly adapting their products in line with the economic outlook. Meanwhile, recent data unveils a significant uptick in mortgage approvals, accompanied by an upward trajectory in wages.
“In combination, these factors mean that prices are expected to continue to rise at the steady rate we have seen so far in 2024, and analysts predict that a stabilisation or slight uptick in prices by year-end as the market begins to benefit buyers to a greater extent than sellers.
“This outlook is positive, but the economic environment remains challenging.
“Today’s inflation data will continue to imbue the property market with a growing sense of confidence as the economic horizon brightens.”
