Inflation has fallen to 3.9% according to the Office for National Statistics (ONS), down from 4.6% in October.
On a month-to-month basis, CPI decreased by 0.2% in November 2023, compared to a 0.4% increase in the same month the previous year.
Additionally, the Consumer Prices Index including owner occupiers’ housing costs (CPIH) has seen a decrease in the 12 months leading up to November 2023, falling to 4.2% from 4.7% in October.
In terms of monthly change, CPIH experienced a slight decline of 0.1% in November 2023, a contrast to the 0.4% rise observed in November 2022.
Both CPIH and CPI annual rates were primarily influenced by reduced costs in transport, recreation and culture, and food and non-alcoholic beverages. This trend indicates a broad-based easing in inflationary pressures across various sectors.
In the core measures, which exclude volatile items like energy, food, alcohol, and tobacco, the CPIH rose by 5.2% in the 12 months to November 2023, down from 5.6% in October.
The annual rate for CPIH goods slowed from 2.9% to 2.0%, while the services annual rate decreased slightly from 6.2% to 6.0%.
Similarly, core CPI increased by 5.1% in the 12 months to November 2023, a decrease from 5.7% in October.
The annual rate for CPI goods fell from 2.9% to 2.0%, and the services annual rate eased from 6.6% to 6.3%.
Reaction
Riz Malik, founder & director at R3 Mortgages:
“All the stars have aligned for a Christmas miracle as we head closer to the 2% inflation target. The fall was greater than expected and has increased the likelihood of rate cuts in 2024. Mortgage lenders will be gearing up for January sales, which be music to the ears of those borrowing in 2024 and should help boost the property market.”
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial:
“This is great news for borrowers, small businesses and the wider public, but more worryingly it shows out out of touch the Bank of England is only a week from their commentary about holding rates higher for longer. As soon as Labour win power, Bailey will be getting his P45z ll. his tenure has been riddled with poor predictions and bad strategy”
Justin Moy, managing director at EHF Mortgages:
“This is a significant reduction in the inflation rate, more than most predicted. With inflation slowing across all the matrixes measured, this is the most impressive cut we have seen this year. This will inevitably send a message to the Bank of England to consider base rate cuts sooner, more likely Q1 in 2024, and that this will also bring SWAP rates down quickly as the markets react positively. Fixed rates will inevitably be priced much cheaper, supporting the expected early 2024 push from lenders, which will also bode well for property prices. It’s the Christmas bonus we were not expecting.”
Ranald Mitchell, director at Charwin Private Clients:
“This is a bigger-than-expected drop in inflation, with transport leading the way. The Government 2% target seems within touching distance now, and will surely put pressure on the Bank of England to ease up rates, possibly in February, at the first opportunity. Owner Occupiers Housing costs (OOH) also seem to have peaked, with a slight drop recorded in the latest figures. With mortgage lenders battling away in their pricing war, it may be that the savage increase in mortgage repayments for the circa 1.4M ultra-low fixed rates maturing in 2024, may be a lot softer than anticipated.”
Michelle Lawson, director at Lawson Financial:
“This fall is quite a significant drop from the last figures and great news all round. Borrowers and bricks and mortar should benefit from this better-than-expected inflation data. The Bank of England may start bringing the Base Rate down sooner than expected in 2024. A great and positive end to a rollercoaster year for borrowers and the property market.”
Emma Jones, managing director at Whenthebanksaysno.co.uk:
“Lots of positives for the mortgage market here. Predictions are saying that May will see at least a 0.25% reduction in rates but drops in inflation could help us see those reductions much sooner. It also reduces the chances of more rate hikes. The competition from high street lenders will start to heighten as they scrabble for the business with rate wars likely coming in again in January and through Q1. This could be a good time for borrowers again after a very unstable (almost) 18 months.”
Rohit Kohli, operations director at The Mortgage Stop:
“The latest CPI reduction to 3.9% for November 2023 is a welcome Christmas bonus for the mortgage market, supporting the recent drop in swap rates which signal an anticipated interest rate cut. This decrease in CPI, along with a decline in core inflation rates, suggests a potential stabilisation in mortgage pricing, offering relief to homeowners affected by rising rates. The Bank of England might now contemplate a more cautious approach to interest rates, potentially leading to a reduction in late Q1 or early Q2 of 2024, while keeping an eye on energy and retail trends. This positive turn is beneficial for the property market, as more predictable mortgage costs would support buyers and investors. Overall, these figures indicate a softening of inflationary pressures, potentially ushering in a period of stability for both the mortgage and property sectors, in tune with the festive season’s cheer.”
Charles Breen, founder & director at Montgomery Financial:
“This should stem the hawkish and irrational tendencies of the three members of the monetary committee who voted for a rate rise and should see the Bank of England hold firm over the spring with the base rate, with hopefully a start to lowering rates by May. Positive news like this along with a continued hold on rate increases by the BOE will increase consumer confidence and business confidence which is at an all-time low. Also, this should be welcome news to the circa million people coming off of their fixed rate this year as it truly looks as if the worst is over when it comes to the great rate spike. Also, this gives good old Rishi another chance to claim something that was beyond his control and remit again.”
Craig Fish, director at Lodestone Mortgages & Protection:
“This better-than-expected inflation data is the Christmas gift that nobody asked for, but that everyone is pleased to receive. This is fantastic news and is the clearest sign yet that things are improving.
“SWAP rates and mortgage rates are likely to continue on their downward trajectory, meaning that the likelihood of seeing mortgage rates beginning with a three could come sooner than expected.
“It has to be noted that this data indicates a real need for change in the MPC after three members voted for an increase at the last meeting. There may be a couple of bumps ahead early next year, but for now, this is the best Christmas gift ever. The property market and borrowers will go into 2023 with a spring in their step.”
Graham Cox, founder at Self-Employed Mortgage Hub:
“Inflation continues to plummet, yet the Bank of England continue to hold the line that a base rate cut is not likely anytime soon. But as the economy weakens, the case for a cut will become overwhelming. Hopefully, they see the light before it’s too late.”
Ken James, director at Contractor Mortgage Services:
“The Good news just keeps coming, today’s headline that inflation has eased to “its lowest annual rate for over two years, is another tick in the box for an economy that seems to be improving, slowly but surely. We have to be careful not to get too carried away as the current rate is still well above what they were a few years ago, and still adrift of the targets we need to hit, but it’s a marked improvement. and it should add fuel to the fire of positive vibes as we head into 2024.”
Peter Stamford, director and mortgage expert at The Mortgage Uni:
“The unexpected dip in inflation is a breath of fresh air, especially for those facing mortgage rate hikes next year. With lenders likely to gear up for a competitive start in January, we might just see a much-needed boost in the property market. It’s a promising end to a tumultuous year, setting a hopeful tone for borrowers and the market as we head into the new year.”
Gareth Davies, director at South Coast Mortgage Services:
“Excellent news to finish off what has been a tough year. The markets should like this and we may see the downward trend for mortgage rates heat up in the new year. A small concern is that less than a week ago three of the MPC voted to raise the base rate yet again. Is there a disconnect between them?”
Ben Thompson, deputy CEO at Mortgage Advice Bureau:
“The good news of a third consecutive base rate pause has already led to lenders cutting rates, and November’s inflation reading is another present for policymakers. However, it’s not all Celebrations and Baileys at the Bank of England. Inflation remains above the 2% target, and as the minutes from last week’s interest rate decision revealed, rates will likely need to stay higher for a while yet to shake out any lingering inflation.
“For those looking to buy or remortgage in the near future, it remains as crucial as ever to seek advice. The market has some festive cheer right now, with more competitive deals available. This should set the tone for 2024, with lenders gaining confidence as the year progresses, and the prospect of a base rate cut appearing on the horizon. As the festivities draw ever closer, this could be the first time that the light at the end of the tunnel has come into sight. However, it remains to be seen just how quickly we get there.”
Andrew Gething, managing director of MorganAsh:
“The significant drop in inflation last month was a result of the lower energy price cap coming out in the wash. While greater than initially predicted, today’s news of a more subtle drop is somewhat akin to the gradual improvements economists expect to see moving forward. Nonetheless, this is more positive news, especially as it is driven by the easing of food costs and petrol prices – two key pressures for the general public.
“Of course, the Bank of England will continue to play Scrooge and remind everyone we are not out of the woods just yet, with inflation still high and some way off the illusive 2% target. They may even have one eye on next month’s figures and any potential impact of both Christmas shopping and seasonal spending. As a result, any predictions for an early base rate drop in 2024 may need to be reevaluated – especially as three MPC members voted for a rise just last week.
“The 2% target is still likely to be some way off, keeping pressure on the most vulnerable of households. With a worrying number of firms unable to identify how many vulnerable clients they currently have, it comes as no great surprise to see that the FCA is set to review firm’s vulnerability management in January, as part of its ongoing enforcement of Consumer Duty.
“The regulation requires all firms to assess clients and ensure they are receiving good outcomes. Building a complete picture of the customer base and identifying those in difficulty just isn’t possible though without the necessary data and a consistent approach to monitoring consumer vulnerability.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“The drop in inflation to 3.9% is greater than almost everyone expected. It will be welcome news to many as we head into Christmas and with wages rising at almost double the rate of inflation at 7.3%, many should now start to feel better off than they have done for a considerable time. That said, there appears to be a real divide between those with money and those with less, for whom any inflation causes a very real impact.
“Of course, inflation is still almost double the 2% target that the Bank of England is set, so further measures will need to be taken, but it means that while interest rates are unlikely to fall just yet, that decreases may well be on the cards by the second quarter of 2024 if inflation continues on its downward trajectory. The markets already appear to be pricing this into mortgage rates, which have been dropping over the past two months. Good news for the 1.3 million people still due to come off their five-year fixed rate mortgage next year.”
Katie Pender, managing director of Target:
“Today’s inflation figure is better news than expected and we are seeing progress towards the Government’s target of 2%. This may be due in part to the positive effects of the Bank of England’s increases in interest rates trickling through.
“Will borrowers start to feel more confident now that inflation and mortgage interest rates are falling? While these headlines offer hope, many homeowners are yet to come off historically low fixed rates and move to higher rates. Affordability will remain a major challenge. In addition, the housing crisis continues, with not nearly enough homes being built. The Home Builders Federation revealed earlier this week that the number of planning permissions being granted for new homes has fallen to another record low.
“As an industry we can help lenders and borrowers by providing a service based on fast and reliable technology systems that put the customer first.”
