UK inflation fell to 2.8% in the year to April, according to the latest figures from the Office for National Statistics (ONS).
This represents a decrease of 0.5 percentage points from recorded 3.3% In the 12 months to March.
Commenting on the latest data, Ben Thompson, Director of Home Conveyancing Mortgage Advice, said:
“Whether you’re looking to buy your first home, move up the career ladder, or remortgage, inflation falling to 2.8% is certainly the news borrowers have been hoping for. As inflation begins to ease, we could also see mortgage rates follow suit, helping to alleviate some of the ongoing pressures on affordability and consumer confidence.
Emma Hollingsworth, distribution director for financial services at LSL, said the fall in inflation was welcome and a bit surprising, but she did not think this would in any way change the Bank of England’s thinking when it comes to interest rates.
“The central bank is walking a tightrope. If it does nothing, the risk of inflation may become entrenched. But raising interest rates now would cause the economy to contract more than expected in the first quarter, and would increase pressure on the faltering labor market.”
“Barring a significant deterioration in the Middle East, we believe the bank will maintain its stance this year on interest rates. Rates have already risen significantly, leaving borrowers confused about what to do next and when to act. Brokers who proactively engage with their clients now are the ones who will help them come up with the best possible solution for their circumstances.”
Ben Alkins, head of mortgages and protection at Just Mortgage, said: “The decline in inflation in April certainly seems counter-intuitive and is likely to be explained in part by the reduction in energy price caps. I think if you talk to people in the supermarket or at petrol stations, they are certainly not feeling it because the Iranian conflict continues to pressure global supply and push prices up. The impact on mortgage rates and broker workloads is also well documented.”
This pressure is still likely to be the norm going forward, Alkins said, especially with no solution to the conflict in sight. “Attention will soon turn to the next key interest rate decision in a few weeks with opinion still divided on the outcome. Could lower inflation be enough to stave off any potential rises for a little longer – especially with the unexpected jump in unemployment announced this week.
He added: “Across the employed and self-employed divisions of our business, we have seen clients getting on with the task at hand, which in many cases means going ahead with their mortgage remortgage. We are still seeing buying activity, although it is still skewed more towards those who need to move, rather than wanting to. Either way, this is an important reminder of the importance of brokers and the vital role we play in helping borrowers navigate the market. The priority now is to ensure we are proactive, maintaining that five-star service and covering all Our rules are to ensure that customers are properly supported.
Richard Pike, sales and marketing director at Phoebus Software, agreed that the sudden drop in inflation to 2.8% was good news for the economy and for consumers, but was unlikely to be the start of a sustained decline and underscored how unpredictable the current environment was. Inflation remains stubbornly high, amid upward pressures from fuel and transportation costs linked to ongoing instability in the Middle East.
“At the same time, the labor market remains weak, and yesterday’s unemployment and wages data will make the Bank of England think carefully about how far it can go in tightening policy without risking a deeper slowdown,” he concluded.
