UK inflation eased slightly in February, according to the latest data from the Office for National Statistics (ONS), with the consumer price index (CPI) standing at 2.8% on an annual basis, down from 3% the previous month.
ONS chief economist Grant Fitzner said of the shift: “Clothing prices, particularly for women’s clothing, was the biggest driver of this month’s fall. This was only partially offset by small increases, for example, from alcoholic drinks.”
The figure came in lower than the 2.9% many analysts had forecast, although it remains above the Bank of England’s 2% target.
The Bank has indicated it expects inflation to rise temporarily to 3.7% later this year, largely due to higher energy prices.
A separate ONS survey has shown that almost half of UK businesses are considering raising prices in the coming months. Many are preparing for April’s increases to the National Living Wage and tax thresholds, potentially adding further cost pressure to the economy.
Reaction
Ben Thompson, deputy CEO, Mortgage Advice Bureau:
“According to our latest poll, 62% of financial services professionals believed last month’s inflation rise would have a negative impact on buyer confidence. However, inflation falling to 2.8% is likely to counterbalance this, leaving aspiring and current homeowners breathing a sigh of relief.
“Coupled with the Bank of England’s decision to hold interest rates last week, this slow and steady approach should give further comfort to prospective buyers. Borrowers are slowly getting used to the fact that mortgage rates are unlikely to fall much further from here, and that this is broadly where new pricing is.
“This is where the value of using an expert adviser cannot be underestimated. They’ll navigate current market conditions to provide you with options bespoke to your financial needs, so you can get mortgage ready.
“In the meantime, focus must now shift to today’s Spring Statement, and how else the Government can make homeownership more affordable in current market conditions, and, of course, drive economic growth.”
Nathan Emerson, CEO at Propertymark:
“This news will provide relief to many homeowners considering both the domestic and international pressures that the UK economy is currently facing and shows that the Bank of England’s cautious path last week to keep interest rates at 4.5% is providing stability.
“This drop in inflation should also provide a positive backdrop to the Chancellor’s Spring Statement later today as she looks to curb some department spending. Many people approaching the housing market will likely feel a welcome degree of optimism, especially considering the spring and summer months tend to be the busiest times of the year for the housing market.”
Paul Noble, CEO of Chetwood Bank:
“Today’s inflation data will feel like a balm to those stung by recent results. While economic uncertainty persists, fuelled in no small part by current events, today’s result offers hope that inflationary pressures might be easing – if only for a moment.
“After a first Budget that left a significant mark, the Chancellor now faces another pivotal moment. The new Government’s balancing act remains delicate, but today’s figures provide some breathing room ahead of the Spring Statement later today. The Bank of England, too, will be watching closely as it weighs the timing of future rate cuts.
“With the question of further interest rate cuts playing out over the coming months, consumers must act now to secure the best savings returns. Financial institutions have a key role to play in ensuring that savers can access competitive and meaningful options no matter what the central bank decides.”
David Hollingworth, associate director at L&C Mortgages:
“The attention will be on the Chancellor’s Spring statement later today. With cuts to spending widely anticipated, the surprise easing in the rate inflation in February will be welcome news.
“Although a slight reduction in the rate of inflation had been expected, today’s figures have outstripped expectation. That can have positive implications for mortgage rates if it helps to boost the market’s outlook for interest rate movements.
“Today’s news may not do enough to materially shift the forecasting though and although this should undoubtedly be seen as good news, it’s widely anticipated that the rate of inflation will lift again in coming months.
“The rate is still appreciably higher than the Bank of England’s target rate. With further rises to come, the message for interest rates is likely to remain one of rate cuts being on the cards but feeding through gradually.
“Mortgage rate have been much more stable recently, with most lenders making small improvements when they can. Although today’s figures are positive, I don’t expect to see a significant change to that pattern. Similarly, we’ll hope that markets will give a calm reception to any inflation increases in the months to come.”
