UK inflation for February came in at 3.4%, down from 4% in January and below the 3.5% predicted by economists.
As such inflation now stands at the lowest level in more than two years, according to official figures.
The Consumer Prices Index (CPI) including owner occupiers’ housing costs (CPIH) stood at 3.8% in the 12 months to February 2024, an rate that was down from 4.2% in January, according to the Office for National Statistics (ONS).
This was a significant drop from the peak of 9.6% in October 2022 – the highest in over 40 years.
The annual rate in February 2024 was the lowest since October 2021, when it was also 3.8%.
The easing in the annual rate between January and February 2024 was a result of prices rising by 0.6% on the month compared with a rise of 1.0% a year earlier.
The owner-occupiers’ housing costs (OOH) component of CPIH rose by 6.0% in the 12 months to February 2024, up from 5.4% in January.
This was the highest annual rate since July 1992 in the constructed historical series.
OOH costs rose by 0.9% on the month, compared with a 0.3% increase between January and February 2023.
The easing in the annual rate between January and February 2024 was a result of prices rising by 0.6% on the month compared with a rise of 1.1% a year earlier.
Newspage asked brokers for their reaction.
Reaction
Andrew Montlake, managing director at Coreco:
“There will be many celebrating the fact that the UK is no longer an inflation nation today, after a larger than expected fall to 3.4%, and a clear trajectory to the magical 2% level now in sight.
“Whilst there is still a lot of global and national pressures to play out, it should relieve some pressures on SWAP rates, which will see lenders start to reduce mortgage rates once more.
“What the markets and the high street need, however, is some positive and decisive rhetoric from the Bank of England, confirming that whilst there will be no surprise cut this month, the first reduction will come imminently.
“An early rate cut before the summer will do wonders for consumer confidence and sentiment is everything.”
Riz Malik, director at R3 Mortgages:
“Even though inflation has fallen to the lowest level since Autumn 2021 and we are well on the way to hitting the target of 2% in April, the Bank of England is still likely to hold rates.
“However, the greater than expected fall does draw us closer to the cut we all desperately wait for. This is a win for Britain’s borrowers.”
Katy Eatenton, mortgage and protection specialist at Lifetime Wealth Management:
“It’s great news that inflation has reduced even more than anticipated, but I don’t see this pushing the Bank of England to cut the base rate quite yet.
“Even though a cut would do wonders for confidence levels and relieve the financial pressures of mortgage holders, the Bank of England is likely to hold steady for now.”
Emma Jones, managing director at Whenthebanksaysno.co.uk:
“The Bank of England should reduce the base rate on the back of positive data like this.
“There is no doubt that homeowners who have been stretched due to the cost of living over the past two years could really benefit from lower rates, especially those coming out of fixed deals this year.
“For some, the mortgage pinch hasn’t yet been felt and the Bank of England could now take the pressure off.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“This dramatic drop in inflation is incredibly welcome to borrowers and the broader economy.
“Hopefully this will be sufficient to see mortgage lenders reduce their rates even though it is still unlikely to sway the Bank of England from reducing the base rate before the summer.”
Darryl Dhoffer, adviser at The Mortgage Expert:
“The pressure gauge is at bursting point at the Bank of England. It’s about time they reduced rates.
“Despite these figures, let’s not set off the party poppers quite yet.
“This basically reads that no one went out to restaurants or pubs, no one ate and no one used heating over winter period, no one fills up their cars anymore, hence reductions in these consumables.”
Hannah Bashford, director at Model Financial Solutions:
“It’s great news that inflation has fallen further than predicted.
“This should now give the Monetary Policy Committee the fuel they need to start reducing the base rate sooner rather than later.”
Rohit Kohli, director at The Mortgage Stop:
“There will be a collective sigh of relief from borrowers this morning as inflation falls to 3.4%, beating market expectations.
“However Andrew Bailey’s base rate brinksmanship means that, despite these figures, the Bank of England is unlikley to budge when they meet tomorrow.
“There are some real positives in these numbers with food and hospitality in particular and this bodes well for the next couple of months as the lower energy price cap works its way into the numbers.
“This could help us hit the 2% target before summer.”
Gareth Davies, director at South Coast Mortgage Services:
“Some good news to wake up to today.
“You’d expect the markets to react well to this, and reductions in gilts and then swaps could follow.
“I’d like to think this eases the pressure on lenders to continue to increase rates, however we all know that the Bank of England follow the Fed.
“Until the Fed makes a move, I can’t see the base rate reducing.”
Harps Garcha, director at Brooklyns Financial:
“Finally, we have some positive news to greet us. Inflation has fallen fallen further than the market’s expectations of a drop to 3.4%.
“However, this does not guarantee a positive response from the Bank of England tomorrow in the form a rate cut.
“Despite the encouraging date, it seems unlikely that the Bank of England will make any moves until June after reviewing the full impact of the higher minimum wage, which takes effect from April.”
Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial:
“A larger reduction in the headline rate and core rate of inflation is great news for mortgage holders and the wider economy. Both desperately need rate cuts.
“This will have added weight to the rationale to cut, but not turbocharged the idea.
“This super-hawkish Monetary Policy Committee is wedded to the idea of rates being held ‘higher for longer’, ensuring inflation doesn’t creep back in if they cut too fast or too soon.”
Craig Fish, director at Lodestone Mortgages & Protection:
“Rishi & Jeremy will be dancing the jig later in celebration of all their hard work and the fact that the ‘plan’ is working.
“These figures are positive news, and with the energy price cap dropping later in the year we are certainly set to get below the 2% target, which should mean that those on Threadneedle Street will drop rates.
“I stress, however, the word ‘should’ because their previous incompetence and inability to do the opposite of the US Federal Reserve suggests that we will have to wait a while yet.”
Gary Bush, financial adviser at MortgageShop.com:
“Ain’t no stopping us now. We’re on the move as inflation drops to a comfy 3.4%, beating analysts’ expectations of a fall to 3.5%.
“There’s much punching of the air at the desks here as we know this will make all the difference to UK households as lenders must now go into a mortgage rate freefall to assist those with upcoming deal renewals.
“Surely the Bank of England can ease off the base rate by even a meagre 0.25% tomorrow, which would have Easter Bunnies hopping out all over the place in ecstasy ahead of the long Bank Holiday weekend.”
Justin Moy, managing director at EHF Mortgages:
“Beating market expectations is always a great signal for mortgage lending, and will be a major talking point for the Bank of England’s polcymakers at their next meet-up.
“This might push Swap prices down a little over the coming days, and will certainly stop the haemorrhaging we have seen over the past few weeks.
“This is not enough for us to make a base rate cut though. We won’t budge until the US make their move unfortunately.”
Ben Perks, managing director at Orchard Financial Advisers:
“It may not be huge, but it’s better than expected and a step in the right direction.
“A reduction of 0.6% does offer reassurance that we are on our way to some form of normality, albeit slowly.
“All eyes now turn to the Bank of England, who have the power to reopen the housing market with a reduction to base rates tomorrow, if they’re brave enough.
“A hold will not suffice and borrowers desperately need the confidence that would come with a 0.25% reduction.
“Swap rates are expected to react favourably to today’s announcement, which will allow lenders to price products more aggressively.
“I hope today’s reduction leads to better rates on the horizon, which will greatly benefit borrowers.”
Amit Patel, adviser at Trinity Finance:
“Inflation falling to 3.4% will be music to the ears of households up and down the country.
“Sunak and Hunt, of course, will be hailing the news that “we have tackled inflation”.
“[We’ve] seen and heard it all before. Just call in a general election and let the nation decide.
“The Bank of England will be oblivious to what is going on around them as they have been for the past two years and, unless some form of divine intervention comes, will keep the base rate on hold, despite inflation beiing at its lowest level since September 2021, when it stood at 3.1%.
“Key thing to note is prices are not yet falling they are just rising less quickly than they were previously.”
Akhil Mair, director at Our Mortgage Broker:
“The decrease in inflation to 3.4% in February is a positive sign, bringing it closer to the Bank of England’s target of 2%.
“To ensure economic stability, it’s crucial for the Bank of England to act swiftly in adjusting rates over the next three quarters, with mortgage lenders following suit.
“This will help alleviate the burden on consumers and support overall financial well-being.”
Graham Cox, director at SEMH Self-Employed Mortgages:
“Better than expected inflation figures give impetus to the clamour for a base rate cut ASAP.
“The 2% target could be hit in a couple of months, yet homeowners and businesses are facing an onslaught of rising costs and higher taxes.
“The Bank of England were slow to raise interest rates, they mustn’t make the same mistake in cutting them.”
Michelle Lawson, director at Lawson Financial:
“Further green shoots of Spring bring welcome relief at last.
“Will this be what the Bank of England was looking for to reduce the base rate?
“I think they will still hold Thursday but there is now more hope for a Summer cut if this trend continues.”
