What impact could this have on the Bank of England’s base rate decision in November?
Annual inflation in the UK was 1.7% in September 2024, down from 2.2% in the previous month and the lowest since April 2021.
Data released by the Office for National Statistics (ONS) on Wednesday also showed that on a monthly basis, the Consumer Price Index (CPI) was little changed in September 2024, down from a rise of 0.5% in September 2023.
The ONS reported that the largest downward contribution to the monthly change in CPI annual rates came from transport, with larger negative contributions from air fares and motor fuels, while the largest offsetting upward contribution came from food and non-alcoholic beverages.
“Inflation eased in September to its lowest annual rate in over three years,” said Grant Fitzner, ONS chief economist. “Lowest airfares and petrol prices were the biggest driver for this month’s fall.
“These were partially offset by increases for food and non-alcoholic drinks, the first time that food price inflation has strengthened since early last year. Meanwhile, the cost of raw materials for businesses fell again, driven by lower crude oil prices.”
CPI rose by 1.7% in the 12 months to September 2024, down from 2.2% in August 2024.
— Office for National Statistics (ONS) (@ONS) October 16, 2024
Read the release ➡️ https://t.co/VlulVDztIW pic.twitter.com/iv83ietkiz
“Inflation falling under 2% for the first time since April 2021 is welcome news for consumers,” commented Paul Noble, chief executive of Chetwood Bank. “Not only does it allow for further respite from rising prices, but it also increases the likelihood that the Bank of England will cut the base rate again when it next meets on November 7.
“If the base rate is cut next month, this will likely result in greater confidence and activity across the property market, with a reduced cost of borrowing increasing demand from prospective buyers. However, while these are important economic shifts, the other unknown is the exact contents of the Chancellor’s Budget, which is being delivered on October 30.”
Ben Thompson, deputy CEO of Mortgage Advice Bureau, added that with inflation now falling below the Bank of England’s 2% target, calls for faster and larger interest rate cuts are likely to grow louder.
“As this is the last inflation reading before the all-important November interest rate vote, all eyes are now firmly on how the Bank of England interprets this,” he said. “Mortgage rates have been rising in the past week or so, however, for buyers, the outlook is still much improved on this time a year ago.”
For Rachael Hunnisett, director of mortgage distribution at April Mortgages, the latest CPI figures “should be good news for Britain’s borrowers and the broader property market.”
“The fact that headline CPI came in well below consensus will be music to the ears of borrowers,” she added. “With headline inflation down to 1.7%, this will give Threadneedle Street some wriggle room too.
“However, the past fortnight or so has once again shown how volatile markets are, with many lenders raising their rates to reflect market concerns around both the oil price and Autumn Budget. In such a volatile political and economic climate, certainty of mortgage payments is becoming even more valuable for a growing number of borrowers.”
Noble stressed that with the macroeconomic climate changing and a raft of new policies expected in the Budget, it will be important for consumers and investors to take stock of their finances over the coming months.
“Getting mortgage ready can take time,” Thompson added. “But doing so early is important, as you can take proper time to assess what the very best mortgage is for your needs, and lock in any possible rate reductions too.”
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