Ahead of Tuesday’s labour market and Wednesday’s inflation data, experts have said the Holy Grail this week for the mortgage and property market will be lower wage growth and another meaningful reduction in inflation.
And if inflation does rise, they urged the Bank of England not to be “trigger-happy in raising interest rates during the final quarter”.
Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages, said: “The Holy Grail this week will be lower wage growth and another meaningful reduction in inflation. We want wage growth to be enough to show a growing economy but not big enough to tear a hole in the inflation parachute. This would make a hold decision more likely from the Bank of England and inject confidence into the market, meaning further mortgage rate reductions.”
Craig Fish, director at London-based Lodestone Mortgages & Protection, added: “With Halloween approaching, it does feel as if the slightest bit of negative data this week could give markets a fright and see SWAP rates start to increase, which will mean mortgage rates may start to rise again. Let’s hope that inflation for September comes in as expected at around 6.5%, and then perhaps we can hope that mortgage rates hold steady or, better still, decrease further.”
Graham Cox, founder at Bristol-based broker SEMH, highlighted the importance of this week’s data: “The mortgage market is on a hair-trigger, nervously awaiting this week’s jobs and inflation figures. Weakening employment figures and inflation continuing its descent will likely see mortgage rates fall further.”
Darryl Dhoffer, director at Bedford-based The Mortgage Expert, urged the Bank of England to be cautious even if inflation ticks up: “All eyes are on the next inflation announcement on Wednesday to see if inflation continues to be on the mend or suffers a setback. If the latter, the Bank of England being trigger-happy in raising interest rates during the final quarter could be fatal for the mortgage and property markets as confidence is hit for six.”
Meanwhile, John Choong, senior equity research analyst at Investing Reviews, said that while the wage data will be closely monitored, it will be trumped by the more up-to-date inflation data: “Given that markets are expecting wage growth to have declined in August, any surprises to the upside could open another can of worms. This could see mortgage rates reverse course with markets potentially pricing in a higher terminal rate than the 550bps currently estimated. Ultimately, though, all eyes will be on Wednesday’s all-important CPI inflation print, as that will serve as the main premise for any further rate hikes, given that it’s more recent data from September, while unemployment and wage growth lags a month behind.”
Ben Tadd, director at Chippenham- and Bath-based broker, Lucra Mortgages, commented: “As long as the inflation numbers to be released on Wednesday continue on a downward trajectory, mortgage rates will likely remain stable for the immediate future. Mortgage borrowers and brokers alike will also be awaiting the jobs data tomorrow, hoping there haven’t been any significant upsurges in basic wage growth.”
But Richard Thompson, director at Sheffield-based Abbeydale Mortgages, suggested that even if inflation does tick back up, mortgage rates may not react as dramatically this time round: “In the event that inflation starts to rise after a two-month period of decline, there could be a potential uptick in mortgage rates, but even then I don’t anticipate a significant spike as we’ve observed in the past.”
