UK inflation surprised on Wednesday, with headline CPI edging down to 6.7% from 6.8% in July and the closely monitored core inflation figure, excluding energy, food, alcohol and tobacco, also falling to 6.2%, down from 6.9% in July.
Speaking to news wire Newspage Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial, said simply: “This data is great news for anyone with a mortgage. Inflation was expected to increase this month, but both headline and core rates have reversed, giving the Bank of England reason to keep rates on hold as opposed to hike them again, as was expected. More mortgage rate cuts are now likely.”
Riz Malik, director of Southend-on-Sea-based independent mortgage broker, R3 Mortgages, agreed: “This data, especially the drop in core inflation, is very positive news ahead of the base rate decision on Thursday. In fact, rather than waiting until the end of the year, we could see a ‘hold’ decision sooner than we think, potentially tomorrow. You can also expect mortgage lenders to continue to reprice downwards, which is great news for borrowers.”
Malik’s views were mirrored by Emma Jones, managing director of Frodsham-based independent mortgage broker, When The Bank Says No: “Following this data, hope is growing that mortgage rates may now have peaked, despite a potential 0.25% increase in the base rate tomorrow.”
Meanwhile, Wes Wilkes, CEO at the Newcastle-under-Lyme-based wealth manager, Net-Worth Ntwrk, said “the sigh of relief from the Bank of England will no doubt be heard across the city and should be enough for a pause tomorrow”.
John Choong, equity and markets analyst at investing comparison platform, InvestingReviews.co.uk, also noted the August inflation print could see the Bank of England pause its rate hikes on Thursday: “On the back of yesterday’s upwardly revised inflation outlook for the year, this cooler-than-expected CPI print will come as a relief. More encouragingly, core CPI, which the Monetary Policy Committee sees as more crucial in the medium term, dropped more than expected. As such, this invokes the possibility that the Bank of England’s rate-hiking streak could end as soon as tomorrow.”
Rohit Kohli, director at Romsey-based mortgage broker, The Mortgage Stop, suggested the data could kickstart the property market: “This latest inflation data will hopefully boost sentiment and kickstart the property market.”
But Justin Moy, founder at Chelmsford-based mortgage broker, EHF Mortgages, sounded a note of caution: “Inflation is still over three times the Bank of England target, so inevitably a further 0.25% increase in Bank Rate will be announced this week, and if world oil production is not increased, inflation will start to increase again. It just shows how fragile everything is, so it’s important that those with mortgage renewals due shortly have their new deal reserved, just in case we see another bounce in Swap rates.”
Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco, concluded: “Whilst the inflation battle is not won yet, this is a substantial advance and the Bank of England should pause from any further action to see if this trend continues rather than go too far and cause economic woe. I would expect to see Swap rates continue to ease over the coming days which will give lenders more ammunition to escalate the rate war that has been brewing for the past few weeks. We have already seen the first fixed rates under 5% and we are now likely to see more choice at this level.”
