The UK property market could benefit from renewed downward pressure on inflation and growing expectations of rate cuts, according to Bank of England Monetary Policy Committee (MPC) member Alan Taylor.
Taylor said that global trade disruption might have a disinflationary impact on the UK economy.
In a speech at King’s College, Cambridge, Taylor said the sharp rise in US tariffs – now averaging 18% compared to 2.5% a year ago – has triggered major shifts in global trade flows, with exporters redirecting goods away from the US to Europe and the UK.
The resulting influx of cheaper imports could push down prices across a range of goods, including those used in construction and homebuilding.
“Trade diversion is likely to have substantial bearing on prices faced by firms and households in the UK economy,” Taylor said, noting that the trend could “lower import prices and amplify disinflationary forces.”
The comments added to growing expectations that the Bank of England could begin reducing rates in early 2026, with Taylor confirming that he has voted for cuts in five of the last seven MPC meetings.
He now sees a “preponderance of downside risks” to the economy, with growth slowing, unemployment rising, and wage pressures easing.
Average UK goods import prices have already been trending down, Taylor noted, as cheaper products from Asia and Europe reach UK markets.
He highlighted the motor industry as one example, with Chinese electric vehicle brands now among the UK’s top 10 bestsellers, partly due to diversion from markets such as the US and EU, where higher tariffs are in place.
Lower import costs feed directly into overall inflation, particularly in sectors such as construction and manufacturing, and could help the Bank achieve its 2% inflation target sooner than expected.
Analysts suggest that a sustained reduction in inflationary pressures would improve mortgage affordability and boost housing market confidence following a subdued 2024/25.
However, Taylor also warned of the risk of a “bumpy landing,” in which inflation undershoots target levels in late 2026 and the economy remains weak for an extended period.
“If we underestimate the forces of trade diversion washing up on our shores, our inflation forecast will miss the mark,” he said.
While the outlook remains uncertain, his remarks indicated that interest rate cuts are increasingly likely, supporting a more positive medium-term environment for buyers, homeowners, and developers.
With falling material costs, easing inflation, and the potential for cheaper borrowing, the property market may be among the early beneficiaries of the global trade realignment that Taylor described as “more diversion ahead.”
