The Consumer Prices Index (CPI) rose by 1.7% in the 12 months to September 2024, down from 2.2% in August, the Office for National Statistics (ONS) has revealed.
On a monthly basis, CPI was little changed in September 2024, down from a rise of 0.5% in September 2023.
Meanwhile, the CPI including owner-occupiers’ housing costs (CPIH) rose by 2.6% in the 12 months to September, down from 3.1% in August.
Monthly, CPIH rose by 0.1% in September 2024, down from 0.5% in September 2023.
This means inflation has fallen below the 2% target set by the Bank of England, and stands as the lowest level of inflation in over three years.
Reaction:
Nathan Emerson, CEO at Propertymark:
“Today’s news will likely bring yet more positivity and confidence across the housing market.
“We are beginning to see the foundations for a strong 2025, which could be further strengthened with a potential dip in the base rate when the Bank of England next meet in early in November.
“We are already witnessing many lenders improving their offerings, which is proving very welcome news for home buyers across all the price ranges.”
Richard Pike, chief sales and marketing officer at Phoebus:
“All in all, it’s a promising outlook for a Bank of England rate cut in November also assisted by yesterday’s news on easing in wage growth.
“We must still remember prices are still rising, just not as fast, and also usually benefit rates are assessed on September’s figures and so it will be interesting to see what the new Government does on this.
“There’s still an expectation that inflation will start to rise again in the next three to six months.
“However, with inflation well below the Bank of England’s target, the scene is set for potentially larger interest rate more quickly cuts than previously thought.
“In balance, however, the economy is looking a lot more stable, and this can only stimulate the housing and mortgage markets in Q4 and into 2025.”
Nicholas Mendes, mortgage technical manager and head of marketing at John Charcol:
“UK inflation has fallen to 1.7% in the year to September, marking the lowest rate since April 2021. This decline is larger than anticipated, as economists had predicted a 1.9% decrease.
“The better-than-expected drop offers a welcome respite for markets, which have experienced fluctuations over the past week.
“Notably, this means that inflation is now below the Bank of England’s 2% target, paving the way for an interest rate cut next month, and potentially another in December.
“While this decline is encouraging, there are still uncertainties surrounding the upcoming budget, and today’s announcement is unlikely to lead to an immediate drop in swap rates or significant shifts in headline best-buy mortgage rates, following recent repricing from lenders such as NatWest and Santander.
“In the coming weeks, following the budget attention will turn to the Bank of England’s Monetary Policy Committee (MPC) meeting and the governors notes on the 7th of November.
“These will provide critical insights into the Committee’s views and the potential trajectory of future interest rate decisions.”
Simon Webb, managing director of capital markets at LiveMore:
“The decline in inflation by 0.5% to 1.7% in the 12 months to September 2024, could suggest that inflationary pressures are easing, which can lead to stabilised living costs.
“For older homeowners and prospective buyers, this relief may improve affordability and financial security, enabling them to make more confident purchasing decisions.
“A lower CPIH could influence the government’s fiscal strategy in the upcoming budget, potentially allowing for targeted investments that support homeownership among older adults.
“Such investments might include tailored initiatives to assist older buyers in accessing affordable mortgage products or incentives for those looking to downsize, ensuring they can effectively navigate their housing needs as they age.”
Peter Stimson, head of product at MPowered Mortgages:
“It’s tempting to regard such a big drop in inflation as the start of open season on cheaper mortgages.
“Since the Governor of the Bank of England said at the start of the month that he was ready to reduce the Base Rate ‘more aggressively’, inflationary pressure has eased significantly and given the Bank a freer hand to cut further and faster.
“With annual wage inflation slipping below 5% for the first time in over two years and consumer inflation now comfortably under the Bank’s 2% target, the stars seem well aligned for the Bank’s Monetary Policy Committee to make another Base Rate cut when it next meets in three weeks’ time.
“There’s just one snag in this rosy picture. The swaps market, which ultimately determines how lenders price their mortgages, has been rising for the past fortnight.
“So much so that one lender is currently offering a mortgage interest rate below the equivalent swap rate.
“Translation – it’s selling money for less than the wholesale price.
“Such crazy pricing is clearly unsustainable, but it also reveals the intense competition among lenders to win borrowers’ business.
“Swap rates are determined by a broader range of factors than just the Base Rate, including gilt yields, which have risen sharply amid investor uncertainty about the upcoming Budget.
“So while a November Base Rate cut now looks distinctly possible if not probable, there’s no guarantee it would instantly translate into much cheaper mortgages.”
Isaac Stell, investment manager at Wealth Club:
“The Bank of England can today breathe a sigh of relief as inflation, at long last, has fallen below its 2% target, vindicating the steady interest rate cut path they have been treading.
“The door has been swung wide open to the possibility of a rate cut at the November meeting, with perhaps a larger than expected cut not entirely off the cards.
“Andrew Bailey stated this month the Bank of England could be “a bit more aggressive” if the news on inflation continued to be good.
“The latest figures would beg the question, how much better does it need to get?
“With headline and core inflation tumbling, the Bank of England should feel confident about stepping up to the crease at its November meeting.
“With declining private sector wage growth, falling prices, and a Government focused on tax rises, an easing of the burden for the public will be welcome.
“Will the Bank of England play with a straight bat or will they look to go big and swing for the boundary? Today’s numbers suggest they could well do the latter.”
Mark Michaelides, chief commercial officer at Molo Finance:
“This will be very welcome news for businesses and consumers – and no doubt for the Government in the run up to the Budget.
“The drop in services rate of inflation from 5.6% to 4.9% will be especially encouraging for the Bank of England.
“Yesterday’s ONS figures already provided some clue, as wage growth eased – falling to 4.9% in the three months to August – sparking further anticipation among some analysts of a November Bank Rate cut.
“However, there are still some indications that inflation may creep higher into year end, so we’ll need to keep a close eye on that.
“Now that headline inflation is more or less where it needs to be, stability from here is the key in settling some of the recent swap rate volatility, which in turn will result in more stable mortgage rates.
“It is worth pointing out, though, that stable mortgage rates do not necessarily equate to low mortgage rates in the sense that we do not expect a return in the near-term to pre-Truss Budget mortgage rates.”
Russell Gous, editor-in-chief of TopMoneyCompare:
“In theory, lower inflation should be good for a currency.
“However, with interest rates at the forefront of discussions, this will increase the chance of a rate cut in November, and it could introduce further volatility for GBP which is already on a downward trajectory from its 2024 highs against the euro and dollar just a few weeks ago.
“This fall is larger than expected by markets, which could also have a knock-on effect for GBP.
“For traders and investors, these inflation numbers offer a degree of optimism, but the wider challenge of stabilising growth and navigating monetary policy remains vital in shaping the UK’s financial trajectory going forward.”
Jonathan Bone, lead mortgage adviser at Better.co.uk:
“The news that inflation has dipped below the 2% mark may offer a glimmer of hope for homeowners and first-time buyers, suggesting that the Bank of England might soon consider reducing interest rates.
“However, don’t be lulled into a false sense of security. Unfortunately, mortgage rates are creeping upward again, driven by concerns surrounding the government’s upcoming Budget.
“It’s clear that the days of near-zero rates are behind us, and homeowners must brace themselves for higher repayments for the foreseeable future – much like energy bills that refuse to come down, mortgage rates seem unlikely to ease significantly anytime soon.”
