Inflation held at 4% in January, according to the latest figures from the Office for National Statistics (ONS).
The figure keeps inflation at the same level as it was at 4%. It had been expected that inflation would rise slightly in January with the energy price cap going up at the beginning of the year.
Furniture and household goods fell by 3.1% and food and non-alcoholic beverages were down by 0.4%.
Food prices recorded the first monthly fall for two years. The rate is still double the Bank of England’s 2% inflation target.
Paresh Raja, CEO of Market Financial Solutions, said: “We’ve arrived a standstill. Inflation refuses to fall away to the Bank of England’s 2% target, which is delaying the point at which the base rate starts to fall.
“That said, all expectations are that it is only a matter of time until the cuts do come, and lenders have been repricing products accordingly in the first six weeks of the year – this can be seen across residential mortgages as well as bridging and BTL mortgages.
“The fact that inflation is no longer falling poses an interesting challenge to Jeremy Hunt. The Chancellor is delivering his Spring Budget in exactly three weeks’ time, and the ongoing battle between high inflation and elevated interest rates must be high on his agenda. In the meantime, lenders need to be proactive to ensure the property market remains active despite lingering economic challenges.”
Further reaction
Nathan Emerson CEO of Propertymark:
“There is a silver lining in the fact that inflation has stayed the same as we are unlikely to see any increases to borrowing and further strains on the purses of the nation.
“That being said, the Bank of England made an optimistic projection in February that the rate of inflation would be back down to 2%, like it was prior to the pandemic, and whilst the figure remains at 4%, this will be sure to make them cautious about cutting rates.
“We now need to start seeing inflation fall so that interest rates can drop too, as this will result in more people being able to move home or step onto the housing ladder.”
Nicholas Mendes, mortgage technical manager, John Charchol:
“The most recent inflation data from the Office for National Statistics (ONS) reveals a 4% rate, marking the initial dataset for inflation in 2024. Economists had anticipated a further increase to 4.2% before today’s announcement.
“In contrast, recent news about US inflation falling less than expected in January has strengthened the dollar. This outcome has diminished the likelihood of the US Federal Reserve making its first interest rate cut since the pandemic next month.
“Adding to the economic landscape, the UK’s unemployment rate decreased at the end of the year, and wage growth cooled at a slower pace than predicted. Unfortunately, this scenario raises concerns among members of the Monetary Policy Committee (MPC) that the labour market has not cooled enough to achieve a sustainable return to the 2% inflation target.
“Core Inflation also remains unchanged at 5.1% considering these factors, the prospect of a bank rate reduction before May does not appear likely.”
Michelle Lawson, director at Lawson Financial:
“This is a pleasant surprise when the forecasts were for an increase. With mortgage rates increasing over the past fortnight or so, we should hopefully see rates stabilise or even edge down slightly as confidence grows. It will be interesting to see how this is interpreted by the Bank of England at the next Monetary Policy Committee meeting on 21st March. But overall, this could be a win for borrowers.”
Rohit Kohli, director at The Mortgage Stop:
“Today’s inflation figures, revealing a consistent CPIH and CPI at 4.2% and 4.0% respectively over the past year to January 2024, is a welcome sign of stability given the predictions of rise. This steadiness, in the current economic climate, suggests lenders’ concerns over an abrupt inflation increase may be temporarily allayed so may bring a period of stable mortgage rates. Meanwhile, core inflation rates holding firm indicate a more controlled economic environment, but with the Fed delaying any changes to interest rates in the US it suggests the Bank of England may opt to keep the base rate steady much longer than anticipated.”
Riz Malik, founder & director at R3 Mortgages:
“The journey to 2% inflation was never going to be a straight line but for the rate to stay the same given the consensus was a slight rise. Inflation is a key factor that will influence the Bank of England’s timing of a rate cut, another is wage growth. Given the US inflation numbers came in hotter than expected, it is likely the Federal Reserve will delay their cuts, which means ours will likely follow suit. As far as the mortgage market is concerned, this could reverse some of the rate cuts seen in January.”
Katy Eatenton, mortgage & protection specialist at Lifetime Wealth Management:
“Inflation remaining steady is better news than expected. Interest rates and swap rates have started edging up over the past couple of weeks, so hopefully this will help stabilise things and encourage lenders to start pricing downwards again. While we all want to see inflation continue its downward trajectory, it was never going to be in a straight line. For the mortgage and property markets, this is better news than expected.”
Imran Hussain, director at Harmony Financial Services:
“This is welcome news and hopefully will put a halt to mortgage rates edging up slightly and being so volatile, offering some stability to borrowers.”
Justin Moy, managing director at EHF Mortgages:
“Whilst this is better than most predicted, recent increases in the SWAP market will be slow to reverse over the coming weeks. The US economy has a major influence on our performance and the higher inflation announced yesterday will make it even more tricky to predict the next few months. Cautious optimism, but it may just take a bit more time to see base rate cut.”
Peter Stamford, mortgage expert at The Mortgage Uni:
“Inflation holding steady at 4% is welcome given that expectations were for an increase and the data suggests a stable and more positive economic outlook. January’s CPI data suggests consistent prices, surely guiding the Bank of England to maintain the base rate at its current level for the time being and avoid any hikes. For those eyeing homes, this means mortgage rates might stay steady. Optimism prevails as we begin to exit winter.”
Ben Perks, managing director at Orchard Financial Advisers:
“When US inflation figures broke yesterday, the general feeling was to ‘strap in’ and ready ourselves for this morning’s press. For us, rate of inflation has remained the same. Not the reduction some were hoping for, but it’s better than our friends across the pond. Experts will now be frantically combing through data searching for reasons for remaining at 4%. This serves as a stark reminder that the road to 2% inflation is a bumpy one. We’ll get there this year and mortgage prospects will improve, but it’s not going to be a straightforward journey and there are no shortcuts to be had.”
Graham Cox, founder at Self Employed Mortgage Hub:
“A mixed bag overall. Good news that the headline CPI rate is unchanged at 4%, when expectations were for an increase. However, the Bank of England will be concerned that inflation in the services section, which makes up 80% of GDP, increased a tad to 6.5% from 6.4%. Until this figure falls significantly, inflation will remain stubbornly above the 2% target.”
Ben Thompson, deputy CEO at Mortgage Advice Bureau:
“Inflation remaining the same will be music to the ears of rate setters at the Bank of England. January’s headline rate had been expected to rise slightly, so this will be seen as good news. Swap rates have been unsettled over the last week, but this reading will fuel more talk of interest rate cuts.
“Inflation is unlikely to fall in a straight line, and as we’ve already seen, there will be ups and downs. However, 2024 is looking to be a more positive year for mortgages. We’ve seen weekly customer volumes close to those of June and July 2023, and with a drop in interest rates potentially coming into view, the outlook is bright for those looking to refinance or get onto the property ladder.”
Adam Oldfield, chief revenue officer at Phoebus Software:
“While it’s a relief that inflation hasn’t risen, 4% is still too high for any consideration of base rate cuts anytime soon. To put it in context, in the U.S. right now they’re getting jumpy over yesterday’s Labor Department’s announcement of a 3.1% rise in CPI.
“Lenders will be watching the rising swap rates like hawks. I think it will be a while before we see a flurry of rate reductions like we’ve just seen in December and January. Consumers are still struggling with the cost of living, not helped by another rise in gas and electricity costs, so movement in the housing market is unlikely to be as buoyant as it could be at this time of year.
