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Lower wage growth and inflation this week will be "Holy Grail" for mortgage and property market

ended 16. October 2023

Ahead of Tuesday's labour market and Wednesday's inflation data, experts have said the Holy Grail this week for the mortgage and property market will be lower wage growth and another meaningful reduction in inflation. And if inflation does rise, they urged the Bank of England not to be "trigger-happy in raising interest rates during the final quarter".

Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages, said: "The Holy Grail this week will be lower wage growth and another meaningful reduction in inflation. We want wage growth to be enough to show a growing economy but not big enough to tear a hole in the inflation parachute. This would make a hold decision more likely from the Bank of England and inject confidence into the market, meaning further mortgage rate reductions."

Craig Fish, director at London-based Lodestone Mortgages & Protection, added: "With Halloween approaching, it does feel as if the slightest bit of negative data this week could give markets a fright and see SWAP rates start to increase, which will mean mortgage rates may start to rise again. Let's hope that inflation for September comes in as expected at around 6.5%, and then perhaps we can hope that mortgage rates hold steady or, better still, decrease further."

Graham Cox, founder at Bristol-based broker SEMH, highlighted the importance of this week's data: “The mortgage market is on a hair-trigger, nervously awaiting this week's jobs and inflation figures. Weakening employment figures and inflation continuing its descent will likely see mortgage rates fall further.”

Darryl Dhoffer, director at Bedford-based The Mortgage Expert, urged the Bank of England to be cautious even if inflation ticks up: “All eyes are on the next inflation announcement on Wednesday to see if inflation continues to be on the mend or suffers a setback. If the latter, the Bank of England being trigger-happy in raising interest rates during the final quarter could be fatal for the mortgage and property markets as confidence is hit for six.”

Meanwhile, John Choong, senior equity research analyst at Investing Reviews, said that while the wage data will be closely monitored, it will be trumped by the more up-to-date inflation data: “Given that markets are expecting wage growth to have declined in August, any surprises to the upside could open another can of worms. This could see mortgage rates reverse course with markets potentially pricing in a higher terminal rate than the 550bps currently estimated. Ultimately, though, all eyes will be on Wednesday's all-important CPI inflation print, as that will serve as the main premise for any further rate hikes, given that it's more recent data from September, while unemployment and wage growth lags a month behind.”

Ben Tadd, director at Chippenham- and Bath-based broker, Lucra Mortgages, commented: “As long as the inflation numbers to be released on Wednesday continue on a downward trajectory, mortgage rates will likely remain stable for the immediate future. Mortgage borrowers and brokers alike will also be awaiting the jobs data tomorrow, hoping there haven't been any significant upsurges in basic wage growth.”

But Richard Thompson, director at Sheffield-based Abbeydale Mortgages, suggested that even if inflation does tick back up, mortgage rates may not react as dramatically this time round: “In the event that inflation starts to rise after a two-month period of decline, there could be a potential uptick in mortgage rates, but even then I don't anticipate a significant spike as we've observed in the past.”

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12 responses from the Newspage community

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Stephen PerkinsVerified
Managing Director at Yellow Brick Mortgages
The Holy Grail this week will be lower wage growth and another meaningful reduction in inflation. We want wage growth to be enough to show a growing economy but not big enough to tear a hole in the inflation parachute. This would make a hold decision more likely from the Bank of England and inject confidence into the market, meaning further mortgage rate reductions.
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Simon BridglandVerified
Director at Charwin Private Clients
I feel that given how quiet things have been recently, lenders will continue to hold rates steady, and even if inflation continues its downward trajectory they will hold. Looking at the petrol forecourt’s prices is perhaps indicative of where inflation is heading. If this is the case, lenders may still hold steady to top up their books given we are over halfway through the month. It’s very difficult to call especially with other events in the world having a very recent impact.
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Bob SinghVerified
Founder at Chess Mortgages
Whilst the recent bout of rate cuts has been largely welcomed by embattled home owners and buyers, we are not out of the woods just yet. If inflation starts to head north again, all bets are off. The market is still in a delicate state of flux as we look for signals that rates have peaked and have done their jobs of trimming inflation. The recent tensions in the Middle East will affect inflation data as oil prices creep up. Homeowners are holding their breath for the next Bank of England Monetary Policy Committee meeting when again it’s going to be a close call.
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Craig FishVerified
Director at Lodestone Mortgages
With Halloween approaching, it does feel as if the slightest bit of negative data this week could give markets a fright and see SWAP rates start to increase, which will mean mortgage rates may start to rise again. With tensions rising in the Middle East, and oil prices on the increase, we're all holding our breath to see what the numbers say. Let's hope that inflation for September comes in as expected at around 6.5%, and then perhaps we can hope that mortgage rates hold steady or, better still, decrease further.
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Darryl DhofferVerified
Founder at The Mortgage Geezer
All eyes are on the next inflation announcement on Wednesday to see if inflation continues to be on the mend or suffers a setback. If the latter, the Bank of England being trigger-happy in raising interest rates during the last quarter could be fatal for the mortgage and property markets as confidence is hit for six.
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Riz MalikVerified
Independent Financial Adviser at R3 Wealth
Following on from the ongoing conflict in Ukraine, potential unrest in the Middle East could further unsettle energy prices in the coming months, leading to added inflationary concerns. Given inflation is a key metric in rate setting, this is highly concerning.
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Justin MoyVerified
Managing Director at EHF Mortgages
Mortgage rates have steadily fallen over the past few months, and I don't see much that will change that trend. With oil prices rising in the Middle East, any underlying improvements to inflation may be lost in the headline rate, but the competition between lenders is still pretty hot, so there's likely to be 'no change' on that front as they battle for market share.
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John ChoongVerified
Senior Equity Research Analyst at Investing Reviews
Given that markets are expecting wage growth to have declined in August, any surprises to the upside could open another can of worms. This could see mortgage rates reverse course with markets potentially pricing in a higher terminal rate than the 550bps currently estimated. That said, the latest PMI data showed that the private sector is slashing jobs at the fastest rate since 2009. Meanwhile, the latest KPMG/REC reports are showing that pay pressures are easing as staff supply continues to increase, while rapid wage growth has also taken a little bit of a breather. Ultimately, though, all eyes will be on Wednesday's all-important CPI inflation print, as that will serve as the main premise for any further rate hikes, given that it's more recent data from September, while unemployment and wage growth lags a month behind.
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Graham CoxVerified
Director at Bridging Hub
The mortgage market is on a hair-trigger, nervously awaiting this week's jobs and inflation figures. Weakening employment figures and inflation continuing its descent will likely see mortgage rates fall further. But if there are any signs of the economy strengthening, or the devastating events in the Middle East spike energy prices, then expect to see further interest rate rises.
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Peter Stamford0
Mortgage Expert at Stamford Home Finance
The mortgage market is like a tightrope walker right now, balancing between global tensions and domestic economic data. Any unexpected jolt — be it from the Middle East or inflation numbers — could tip the scales. While some signs point to steadier rates, it's anyone's guess until the next Bank of England meeting. So, whether you're a homeowner or a prospective buyer, keep your eyes peeled and your options open. It's a nail-biter, but staying informed is your best bet.
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Ben TaddVerified
Director at Lucra Mortgages
As long as the inflation numbers to be released on Wednesday continue on a downward trajectory, mortgage rates will likely remain stable for the immediate future. Mortgage borrowers and brokers alike will also be awaiting the jobs data tomorrow, hoping there haven't been any significant upsurges in basic wage growth. Given the current situation in the Middle East and the fact that oil prices have been on the rise too, it could well be a tight call on whether the inflation data is positive or not. Unless the inflation numbers are negative, it's unlikely that this will act to trigger a reverse in the rate reductions we have witnessed in the market since July, with mortgage rates likely to remain where they are for now at least.
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Richard Thompson0
Director at Abbeydale Mortgages
Regarding the employment situation, a robust job market and reduced unemployment rates might lead to interest rates remaining stable. It's unlikely that lenders would be eager to raise interest rates given the recent decline in mortgage applications from first-time homebuyers and existing homeowners over the past few months. In the event that inflation starts to rise after a two-month period of decline, there could be a potential uptick in mortgage rates, but even then I don't anticipate a significant spike as we've observed in the past.