UK inflation dropped to 4.6% in October down from 6.7% in September, according to the latest figures from the Office for National Statistics (ONS).
The figures will give Prime Minister Rishi Sunak cause to celebrate after he pledged to half inflation by year-end.
This latest rate is the lowest recorded since October 2021 and marks a considerable decline from the 11.1% peak seen in October 2022, which was the highest since 1981 according to historical modelled data.
On a monthly basis, the CPI remained unchanged, contrasting with a 2.0% increase in the same month last year, indicating a stabilisation of prices.
Both the CPI and the CPI including owner-occupiers’ housing costs (CPIH) were primarily influenced by similar factors, with the owner-occupiers’ housing costs (OOH) making up 16% of the CPIH and contributing to the main differences observed between the CPIH and CPI rates.
The recent figures suggest a potential shift towards more manageable inflation rates after months of steep climbs.
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Reaction
Adam Oldfield, chief revenue officer at Phoebus Software:
“Bringing inflation down was the intent from the Bank of England when it first started increasing the bank base rate and we are, at last, getting to see the impact. Today’s headline figure will no doubt be one that gives a level of confidence to many. Nonetheless, the headline that inflation is coming down is great, but it does still mean prices are rising over double the amount that the Government is happy with.
“On the flip side wages are out pacing inflation, which should put more borrowers on a better footing. However, we saw last week that arrears continue to increase, and the governor has already stated that the base rate won’t be coming down any time soon, even if inflation continues to fall. So, next week’s budget is a huge opportunity for the Chancellor to step in and bring some much-needed help to a housing market that should be contributing massively to the UK economy. How far he will go and what impact anything he does introduce will have, is up for debate. We have seen too many times how successive governments use the UK’s appetite for home ownership as a bargaining tool as we get closer to a general election. Will this Government be any different?
Simon Webb, managing director of capital markets and finance at LiveMore:
“After two months of no movement in inflation, it is good to see the October figures showing a significant fall to 4.6%. Inflation is now well under half of what it was a year ago at its peak of 11.1% but it still has some way to go to reach the 2% target.
“The drop in inflation was partly driven by a 7% reduction in the Ofgem price cap, compared to a 25% increase in October last year. Those high hikes in energy costs last year now fall out of the annual inflation figures.
“Core inflation, which removes food and energy prices, was also down to 5.7% from 6.1%, and plays a key part in the Monetary Policy Committee’s interest rate decisions.
“This latest inflation data should be enough to keep base rate at 5.25% although there is still division in the MPC. The Bank of England’s chief economist Huw Pill recently suggested there was no need to increase base rate as inflation is steadily falling. However, governor Andrew Bailey believes it is too soon to say that rate rises have ended.”
Ben Thompson, deputy CEO at Mortgage Advice Bureau:
“Another month of inflation falling is good news for homeowners and prospective buyers alike. Consecutive drops will reinforce the view that the worst of the interest rate hikes is behind us, and we’ve now reached the peak.
“Although base rates will likely remain high for some time to force a further drop in inflation, we could see a host of lenders looking to drop their rates further in the coming weeks. For homeowners approaching the end of their current deal, it’s vital they seek guidance from a mortgage adviser to find the right option for them. Likewise, prospective buyers should now be thinking about how to get mortgage ready by speaking with an adviser.”
Riz Malik, founder at R3 Mortgages:
“This is a big drop and takes us back to the levels of October 2021. It is also cooler than expected and this positive economic news should mean we end 2023 with another base rate hold. Expect further fixed rate mortgage rate reductions in the days to come. For borrowers, this news is as good as it gets.”
Ranald Mitchell, director at Charwin Private Clients:
“This significant drop in inflation will come as a huge relief to everyone and we should now expect further mortgage rate cuts in the days to come. Mortgage lenders were already at war with each other on pricing and these inflation figures will only encourage them to go even further, and quicker. It looks like the property market will reignite in 2024.”
Craig Fish, director at Lodestone Mortgages & Protection:
“This better-than-expected inflation data is fantastic. We will now see out 2023 with a base rate hold at 5.25% and an improving rate war from lenders all trying to fill their boots after what has been a disastrous year for their mortgage lending. This will hopefully now help those who need to remortgage and not just those who are purchasing as lenders start to show more support to all borrowers and not just a select few.”
Rohit Kohli, director at The Mortgage Stop:
“Inflation falling so sharply will be a massive boost for mortgage borrowers and the broader property market. With inflation tumbling to 4.6%, major lenders like HSBC and Halifax slashing rates again this week and the base rate likely to be left on hold, the Chancellor has a golden opportunity to reignite the UK housing market in his Autumn Statement and not just squander it by slashing stamp duty. For homeowners, who haven’t had to remortgage yet, this will be a welcome relief and offer some hope to their ever-decreasing budgets. For those who switched to a tracker, it’s worth starting to speak to your mortgage adviser to see if there are opportunities to save from the highs seen in the summer.”
David Hollingworth, associate director at L&C Mortgages:
“Better than expected inflation data should only help to underpin the improvements in rate outlook that has already seen fixed mortgage rates dropping.
“2-year fixed rates have edged below 5% in the last couple of weeks, with major players like Halifax and HSBC joining the leading pack today. 5-year rates are nudging closer to 4.50% and could dip below that mark in coming weeks.
“Although it’s worth remembering that three members of the MPC voted for a base rate rise this month, increasingly the hope will be that it’s now peaked, and that the conversation could turn to when rates could be cut next year. I’d expect to see more lenders following the more sharply priced competition and improvements look set to continue.
“That will be welcome news to borrowers that were facing substantially higher rates only a few months ago, although those coming to the end of an ultra low fixed rate will still be seeing a sharp rise in payments. Shopping around and taking advice will remain the name of the game in a shifting market.”
Jamie Lennox, director at Dimora Mortgages:
“Christmas has come early for borrowers with a strong downturn in inflation. This will come as a huge boost to anyone seeking a mortgage and the wider property market, as confidence returns and the likelihood of further base rate increases reduces by the week.
“We could now see a mortgage sale bonanza in time for Black Friday with further fixed rate reductions to follow.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“This latest inflation data is even better than expected and a giant leap forward in terms of the future outlook for the economy.
“The annual rate in October 2023 was the lowest since November 2021, which will see an influx of mortgage rate reductions over the coming weeks providing Christmas joy to millions of homeowners.
“This should support the Bank of England holding the base rate steady for the next quarter at least. Whilst energy price reductions have helped, they are still higher than they were two years ago, with the biggest reduction being in the price of goods.
“The Government and Bank of England will take credit for this latest data but it has almost exclusively been achieved by external factors beyond their control.”
Gary Bush, financial adviser at MortgageShop.com:
“It speaks volumes when we are all ecstatic about a 4.6% inflation figure with a target of 2%, but that is exactly where we are today. Either way, this is great news for the general public and adds to the positive uptick in sentiment we are seeing as 2023 draws to a close. The Bank of England will definitely continue to pause their base rate increases on 14th December.”
Ashley Thomas, director at Magni Finance:
“It’s great news to see such a significant decline in inflation. This is welcome news for borrowers, and an early Christmas treat would be further reductions in mortgage rates. I fully expect mortgage rates to reduce further in the coming days and wouldn’t be surprised to see a number of lenders offering options sub-4% before the new year. This will impact a number of people, especially those with rates expiring shortly. I would recommend that those who have recently secured rates to double check if there are better products now available.”
Graham Cox, founder at director mortgage broker SEMH:
“This huge drop in the headline inflation rate was widely expected but is great news nonetheless. The Bank of England will still be concerned about services inflation as reflected in the core inflation figure, though, which remains stubbornly high. Until that starts falling sharply, it’s likely the base rate will remain on hold.”
Bob Singh, founder at Chess Mortgages:
“Rishi has fulfilled his pledge to halve inflation from its dizzy heights. The 4.6% CPI figures are better than expected and mirror the sentiment in the States.
“This will cheer the markets and vindicate the Bank of England’s decision to end the rate rises.
“However, the spectre of wage inflation looms large so any thoughts of rates falling are premature but they could fall ahead of forecast. Lenders certainly feel this given the aggressive rate cuts seen this week.”
Amit Patel, adviser at Trinity Finance:
“This is a huge milestone for households and businesses up and down the country. However, inflation is still well above the Bank of England’s target of 2% and people are still struggling to make ends meet.
“I expect lenders will re-price their mortgages over the next few days on the back of the positive data. All eyes will now turn to the Autumn Statement next week.”
Justin Moy, managing director at EHF Mortgages:
“This is excellent news for borrowers, and while rates will continue to slide over the coming months, the reduced inflation figures will give the public a renewed confidence that is so important with property and finance.
“The base rate will be held for a few months, at least until the end of Q2 2024, as inflation is still more than twice the current target, and either this needs to change or we have a bit further to go before we see base rate cuts.”
Gary Boakes, director at Verve Financial:
“The talks all week were that inflation would drop below 5%. HSBC and Halifax seemed to agree as they slashed their rates, with 2-year fixed rates going below 5%.
“This is going to be a massive boost to the market and I fully expect swap rates to react positively and other lenders to follow HSBC and Halifax and reduce rates over the coming week.
“With the Autumn Statement around the corner, things are looking far less bleak than they were just a short while ago.”
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial:
“This is great news for borrowers as the inevitable happens and inflation falls away after the spike in energy markets following the Ukraine war filters through other consumer staples and out the other side. Sunak will claim victory, in the same way as a cupbearer may have when Napoleon was successful.
“Mortgage rates should continue to reduce as lenders scrap it out to be top of the best buy tables, beware of the hefty fees that come with such an accolade.
“Sterling should, if not immediately, fall back on the Euro and the Dollar as interest rates could fall sooner rather than later with such a drop in inflation.
“Savers may have also seen peak rates and should consider locking into fixed rates bonds now if the money is needed in the medium term.”
Elliott Culley, director at Switch Mortgage Finance:
“The inflation data will be really positive for the mortgage market. In the short term, we should see further mortgage rate reductions.
“The Bank of England has stated that the base rate will remain the same for most of 2024.
“With inflation really starting to drop I think base rate reductions could come much sooner. There have been some predictions it will have reduced by May, but it could be much sooner than this.”
Jill Mackay, savings specialist at Scottish Friendly:
“Inflation rose like a rocket last year and has been falling more like a feather during 2023. Much to the despair of families up and down the country, it has remained remarkably sticky.
“But that situation has now changed after October’s dramatic fall in inflation. The improved figure has largely been driven by a significant slowdown in gas and electricity costs, as well as the price of food and non-alcoholic beverages.
“However, the reality for UK households is that living costs are still rising considerably.
“Heading into winter people’s energy bills will go back up and experts are predicting that the energy price cap will rise again in January. It therefore seems unlikely that inflation will continue its rapid descent and could hover around 4% or 5% mark for some time.
“We are clearly not out of the woods yet and households should keep a firm handle on their finances to mitigate the impact of any higher bills and unexpected costs. Building up a considerable savings buffer remains the priority for anyone able to do so, while for longer-term goals investing should be part of people’s thinking.”
Imran Hussain, director at Harmony Financial Services:
“Great news and an early Christmas present to follow on from major lenders such as HSBC and Halifax dropping rates this week. Let’s hope this is a positive sign for the mortgage and property market heading into 2024.”
Lewis Shaw, owner and mortgage expert at Shaw Financial Services:
“Whilst this is positive news and will invariably lead to more fixed-rate mortgage reductions leading up to Christmas, we should temper our joy. This doesn’t mean prices are falling, simply that they’re rising less quickly.
“For huge swathes of the public who are still reeling from the cost of living crisis, this is not a positive. If they can’t afford to live this month, then prices only rising by an extra few percent makes it worse, not better.
“With wage growth stalling, unemployment and insolvencies rising, now is perhaps not the best time to begin counting chickens”
Alastair Hoyne, chief executive officer at Finanze:
“Christmas good news? Perhaps. Inflation’s on a rollercoaster. Mortgage rates might continue to ease, giving borrowers further relief. Savers will still be feeling the pinch. Small businesses? It’s a mixed bag with a keen eye needed on the bigger economic picture. Uncertainty still lingers in the air but positive news is always welcome.”
Peter Stamford, director and mortgage Expert at The Mortgage Uni:
“Today’s inflation news is a pivotal moment, signalling a hopeful outlook for 2024’s mortgage scene. Lenders, keen to bounce back from a lacklustre year, are cutting rates, sparking intense rivalry.
“While the Prime Minister might take credit, external influences are the real drivers. We’re not entirely clear yet, but the mortgage market is bracing for an energetic contest, with further rate reductions and a dynamic kick-off to the New Year.”
Jamie Thompson, mortgage broker at Jamie Thompson Mortgages:
“The Government claimed it’s goal was to halve inflation in a year. Well inflation has halved but the truth is that this would have happened had regardless as it was so high a year ago. Never has a less ambitious goal been set by a Government. They may have well said that they are going to make the country colder by December. No doubt this will be claimed as a typical Tories no best when it comes to the Economy. I think we need to remind them we have memories for more than a goldfish.”
