The news, which comes a week before the Bank of England’s next interest rate decision, has eased concerns about a policy rate hike.
However, with continued uncertainty over the conflict in Iran, which recently erupted, there are fears that inflation will rise again.
This is because the price of oil has risen due to the ongoing strikes, and this is likely to impact gasoline prices when the next Consumer Price Index (CPI) – which measures inflation – is published.
Indeed, this threat has an impact on mortgage rates, causing swap rates to rise and forcing lenders to raise interest rates accordingly. Just this week several major lenders raised interest rates by as much as 0.20%.
David Hollingsworth, Associate Director at Real estate loans “Borrowers will be hoping that today’s inflation figures provide some reassurance following the uncertainty caused by the ongoing strikes in Iran, which has seen several major lenders increase their fixed mortgage interest rates in recent days,” he said.
He added: “Today’s inflation figure is welcome news for borrowers, and the decline may ease the pressure slightly on the Bank of England’s Monetary Policy Committee to take immediate action to raise interest rates in the near term.
“While it may allow more time to assess how inflation continues to develop, borrowers cannot expect today’s numbers to reverse recent increases in mortgage interest rates, and we are likely to see further upward moves by lenders.”
What mortgage borrowers can learn from this
This mixed bag of wealth may seem confusing to borrowers. On the one hand, inflation has fallen which means the cost of living is lower and there is greater hope that interest rates will remain steady. But on the other hand, mortgage rates are rising.
If you’re feeling confused and wondering what this means for your mortgage – that’s understandable. As such, the advice from experts across the board is to move quickly if you’re about to take out a mortgage.
Sarah Coles, head of personal finance at AJ Bell, said: “Mortgage rates have fallen across the board, but this week has seen a big jump, as markets begin to anticipate early rises in interest rates and swap markets begin to price them in.
“This shows how difficult it is to guess where the mortgage market is headed at a time of uncertainty.
“This is also why it’s not worth waiting for interest rates to reach a magic number, even if the market has been moving in one direction for a while.
“Alternatively, if you have a remortgage due within the next six months, see if you can agree a deal to remortgage your mortgage now. If rates fall from here, you can shop elsewhere, but if they rise again, you’ll have got a competitive rate.”
This advice was echoed by Hollingsworth, who said borrowers should not panic, but should not delay reviewing their options.
He explained: “Mortgage rates can move quickly, as we have seen over the past week, so anyone nearing the end of their current deal or planning to purchase a home should consider securing a competitive rate sooner rather than later.”
“Most lenders will still allow borrowers to switch to a cheaper deal before closing if interest rates fall again, giving them certainty now and flexibility if the market moves in their favor later.”
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