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FALLING INFLATION ENHANCES CHANCE OF FEBRUARY RATE CUT

SPF

Picture of Mark Harris

Mark Harris

Chief Executive

News that the rate of consumer prices index (CPI) inflation fell to 2.5 per cent in December, a surprise dip from November’s 2.6 per cent, bodes well for the future direction of interest rates.

Although the Bank of England’s inflation target is 2 per cent, it is encouraging that it is moving in the right direction and with it being weaker than previously thought, it raises the chances of a February interest rate cut to 4.5 per cent. With GDP growing by just 0.1 per cent in November, following two months of contraction, a rate cut would also help counter the slowdown in the economy.

Swap rates, which underpin the pricing of fixed-rate mortgages, have softened on the back of the inflation and GDP data but regardless, a number of lenders have raised rates in the past few days.

Anyone looking to take out a new deal this year should seek advice from a whole-of-market broker such as SPF. With lenders repricing at short notice, it is worth planning ahead as much as possible – rates can be booked several months before you need them so it might be worth reserving a deal now; if pricing is lower by the time you take out the mortgage, you should be able to move onto a cheaper product.

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