This time it's how optimistic your customers are
We all know that consumer confidence can be one of the biggest drivers of the housing market. Clients that feel safe getting a new mortgage in the expectation that interest rates are dropping, or at least not going to jump, are clients that are far more likely to complete that home loan application.
Mortgage rates are already dropping, and the latest Bank of England quarterly survey on public attitudes towards inflation seems to show that home buyers are aware of the good news in that respect – as homebuyer sentiment shows. The new survey, conducted by Ipsos between August 2 and 6, 2024, shows that respondents also expect things to keep getting better as they believe inflation is easing slightly, with a median estimate of the current inflation rate at 5.2%, down from 5.5% in May 2024
Looking ahead, the public expects inflation to continue cooling, with a median forecast of 2.7% for the next year, a small drop from 2.8% in May. Expectations for inflation two years ahead remained steady at 2.6%, while long-term inflation expectations rose slightly to 3.2% from 3.1% in May.
When asked about the broader economic impact of rising prices, a substantial 67% of respondents felt the economy would weaken if inflation accelerated, up slightly from 65% in May. Despite inflation concerns, 45% of respondents believe the Bank of England’s inflation target is “about right”, up from 40% in May, with 33% saying the target is too high.
Public sentiment around interest rates also showed significant changes. The survey revealed that fewer people (55%) thought interest rates had increased over the past year, compared to 64% in May, while the proportion of respondents who believed rates had fallen rose to 11%, up from 6%. As for future expectations, fewer respondents (29%) now anticipate rates will rise over the next year, down from 34% in May.
Read next: Nationwide, other lenders reduce mortgage rates
In terms of what respondents think is best for the economy, 42% said interest rates should be lowered, unchanged from May, while only 9% supported an increase in rates, down slightly from 10%. On a personal level, 33% of respondents said they would benefit from a drop in interest rates, a slight rise from 31% in May.
Public satisfaction with the Bank of England’s efforts to manage inflation has also improved. The net satisfaction balance, which measures the difference between those satisfied and dissatisfied with the Bank’s performance, rose to 4%, a significant increase from -4% in May.
Overall, the survey highlights a cautious but improving outlook from the British public regarding inflation and interest rates, as well as growing confidence in the Bank of England’s handling of the economic situation.
