Brokers react to inflation falling to 4.6%
In October, the annual inflation rate in the UK saw a significant decline, reaching 4.6%, the slowest pace of annual price increases in two years, according to the Office for National Statistics (ONS)
Additionally, core Consumer Price Inflation (CPI) decreased from 6.1% in the previous month to 5.7% in October, and CPI, including owner occupiers’ housing costs, fell to 4.7% from 6.3%.
This shift suggests a notable moderation in inflationary pressures, marking a positive development in the economic landscape.
So, how have brokers reacted to the news?
Andrew Montlake (pictured), managing director at Coreco, said the latest inflation figures provide relief for both policymakers and borrowers.
“While the Prime Minister may attribute this positive shift to policy success, it is crucial to acknowledge that it is a combined result of elevated interest rates and an expected natural easing of overall prices,” he said.
Montlake added that recent days have witnessed a substantial decline in SWAP rates, aligning with the anticipated fall, and he believes these figures are likely to deter any immediate Bank of England base rate increases.
“Despite this optimistic turn, a watchful eye remains on persistent core inflation, signalling that complete resolution is not yet within reach,” Montlake stated.
Looking forward, he believes lenders are gearing up for a competitive start to the New Year, eager to recover from a challenging lending period.
The anticipation, Montlake said, is for a continued push in competitive strategies, with mortgage rates expected to see further reductions.
“This transition from a mild skirmish to a full-fledged interest rate war in the lending sector sets the stage for an intriguing period ahead,” he commented.
Borrowers, navigating this evolving landscape, Montlake added, may find themselves benefiting from the resulting market dynamics and potentially favourable mortgage rates in the coming months.
Stephen Perkins, managing director at Yellow Brick Mortgages, agreed with Montlake and added that the recent inflation data exceeded expectations and mark a significant stride forward in shaping a positive economic outlook.
“The annual rate for October 2023 hit its lowest point since November 2021, setting the stage for a wave of mortgage rate reductions in the upcoming weeks, bringing holiday cheer to numerous homeowners,” he stated.
Perkins added that this favourable trend is anticipated to provide stability, potentially leading the Bank of England to maintain the base rate for at least the next quarter.
While the reduction in energy prices has contributed to this positive development, Perkins commented that it is noteworthy they still surpass levels from two years ago.
The most substantial impact, he added, has been on the prices of goods, reflecting a noteworthy reduction.
“Although the government and the Bank of England may claim credit for this positive turn, it is essential to recognise that external factors beyond their control have predominantly driven these outcomes,” Perkins stated.
As homeowners look forward to potential mortgage rate cuts, he said, the broader economic landscape appears to be benefiting from this unexpected downturn in inflation.
“While challenges persist, especially in the energy sector, the resilience of the economy, influenced by factors beyond governmental control, is a key player in this positive shift,” Perkins said.
What is your view on the latest inflation figures from the Office for National Statistics? Let us know in the comment section below.
