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INFLATION FALLS TO ITS LOWEST LEVEL FOR TWO-AND-A-HALF YEARS, INCREASING CALLS FOR RATE CUTS

SPF

Picture of Mark Harris

Mark Harris

Chief Executive

With the rate consumer prices have been rising at falling to 3.2 per cent in the year to March, down from 3.4 per cent in February, according to the Office for National Statistics, it’s time for the rate setters to be bold and start cutting interest rates. Inflation has been falling gradually since peaking at 11.1 per cent in 2022, and continues to move towards the Bank of England’s 2 per cent target.

There is a sense that some buyers and sellers are waiting for that first rate reduction from the current level of 5.25 per cent before taking action, and when it comes, it will give the housing market a welcome boost. Financial markets responded to the March inflation figures by reining in expectations of an imminent rate reduction as the figure was slightly higher than forecast by economists. Some had been expecting the first rate reduction in June but many have pushed these forecasts back to August or September.

Falling interest rates have a knock-on effect on Swap rates, which underpin the pricing of fixed-rate mortgages. Five-year Swap rates rose this morning to 4.21 per cent from 4.14 per cent yesterday on the back of the inflation news and until they are consistently falling, lenders are unlikely to reduce mortgage rates further.

As the weather improves and the days grow longer, there is optimism in the air with buyers and sellers demonstrating more willingness to transact. While the flurry of mortgage rate reductions in January have fizzled out, pricing is still considerably cheaper than a year ago so borrowers holding off in the hope of cheaper rates may be wise to secure a product now. If, when you come to take out your mortgage rates have fallen, SPF Private Clients will advise you of the cheaper rate, so you don’t pay more than you need to.

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