Copy article

Inflation falls in June - ONS

ended 19. July 2023

The latest inflation data is just out. It shows the Consumer Prices Index (CPI) rose by 7.9% in the 12 months to June 2023, down from 8.7% in May, and that Core CPI (excluding energy, food, alcohol and tobacco) rose by 6.9% in the 12 months to June 2023, down from 7.1% in May, which was the highest rate since March 1992. Full report >> here <<. Selection of Qs for you:

  • What does it mean for mortgage rates, borrowers, and the property market?
  • What does it mean for businesses and the economy?
  • What does it mean for savers and investors?
  • What are you expecting at the next Bank of England MPC meeting?

Any other thoughts, whizz them across. The sooner you respond, the greater your chances of being featured.

19 responses from the Newspage community

Copy all

Star Quote
Copy

Premium
John Choong
Senior Equity Research Analyst at Investing Reviews
Miracles do happen. For the first time in months, CPI comes in lower than expectations at 7.9%. Core CPI also comes in a touch lower at 6.9%, which should allow lenders and borrowers alike to breathe a sigh of relief. That said, champagne bottles shouldn't be popped just yet as the path to 2% remains a treacherous journey, with core CPI still high and sticky. The easing figures should allow gilt yields to find some relief in the coming days, with markets now less likely to price in a 7% terminal rate from the Bank of England. We may now see mortgage rates start to come down as well. Nonetheless, this will be dependent on whether the next few prints continue to show cooling inflation, especially on the core front. With wage pressures also beginning to ease as well, there's now hope that both the housing market and the UK economy can achieve a 'soft landing' without entering a recession.
Star Quote
Copy

Peter Stamford
Mortgage Expert at Stamford Home Finance
For the sake of millions of homeowners, I sincerely hope that this will mean a pause in the Bank of England's interest rate hikes. But I fear they will see this fall as proof their blunt-edged strategy has been working and could continue to hike. This fall in inflation could have a sting in its tail regarding interest rates.
Star Quote
Copy

Jon Maloney
Managing Director at Kuppa
Finally, some positive news regarding the economy, something that is much needed in the SME world right now. Hopefully, this will give the Bank of England the confidence to halt any further rate increases, which should in turn slowly begin to get things moving again in what has become a very stagnant period for the economy. There's still a long way to go yet but things are moving in the right direction.
Copy

Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
The amount of this fall may just be the right amount to make the Bank of England change course. It’s more than expected, and should continue on this trajectory. With most mortgage holders not experiencing interest rate rises yet, because they are on fixed rates, it’s time for the Bank of England to reverse its strategy and start cutting rates. This is unlikely to happen until the end of the year but needs to be soon to stave off a severe recession.
Copy

Editor
Craig Fish
Director at Lodestone Mortgages
There is a god, after all. This fall in inflation and core inflation is bigger than expected and it's expected to continue in this direction for the remainder of the year. It's to be noted, though, that this has nothing to do with the Bank of England's interest rate increases so I hope that they don't try to take credit for it. Because the pain of the rate increases has not yet been felt by most mortgage holders, I sincerely hope that the MPC stop their ridiculous and futile approach to this problem, and ease off with the rate increases now. I fear they won't and we may still see an increase or two, but mortgage holders across the UK are all crossing their fingers, toes, arms and legs.
Copy

Editor
Rohit Kohli
Director at The Mortgage Stop
Today's drop in inflation to 7.9% is a bigger fall than anticipated for the first time in a long while and is a silver lining. However, it's not time to pop the champagne corks just yet. We need to keep a close eye on how this feeds into swap rates and the subsequent reactions from lenders. While this news is a breath of fresh air, we're not out of the woods yet. Hopefully, it gives Threadneedle Street some pause for thought and we see some stability in interest rates. I think this will be welcome news to the property market and businesses alike but external factors, such as the ongoing conflict in Ukraine, could potentially reverse these drops, especially with food inflation remaining high. Let's remain cautiously optimistic and continue to navigate these financial waters with cautious optimism. It will be intriguing to see whether a fall in swap rates will prompt lenders to reduce their product prices as swiftly and as frequently as they increased them.
Copy

Editor
Wes Wilkes
CEO at IronMarket Wealth
The move down in both headline and core CPI today, and also coming in under expectations, will be welcomed by markets and provide some relief to borrowers, investors and no doubt the Bank of England, too.
Prices are still rising by nearly four times the Bank's target so we are certainly not out of the woods by a long stretch but this could mean the start of the end of the vicious rate cycle as the Bank will want to avoid rising rates into a deflationary environment if the trend in inflation shifts aggressively downwards from here. Over to you Mr Bailey.
Copy

Editor
Stephen Perkins
Managing Director at Yellow Brick Mortgages
Whilst it is very welcome news that inflation has fallen more than analysts had predicted, it should be noted this was mainly due to falling fuel prices. Core CPI (excluding energy, food, alcohol and tobacco) is rising 6.9% down from 7.1% in May, meaning many will not feel an easing in the rising cost-of-living and the government still have plenty to do to achieve their target of halving inflation by the end of the year. Hopefully, today's inflation print will be sufficient to hold base rates in the next Bank of England MPC meeting, which would be much appreciated by everyone, especially homeowners.
Copy

Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
Inflation falling to below 8% is fantastic news. If the 'market' responds positively to this greater-than-anticipated dip, we could witness notable shifts in the mortgage market. It is a shame that August's base rate meeting is before the release of August's inflation data, which could set the scene for the rest of 2023. This data should take into account the reduction in energy prices that occurred in July. If this leads to another substantial decrease, it could potentially curb aggressive rate hikes for the foreseeable future.
Copy

Editor
Andrew Montlake
Managing Director at Coreco
These inflation figures will come as a relief to everyone, and whilst we are not out of the woods as yet, we have at least reached a clearing where we can safely pitch our tents and rest.
I suspect we will see a slight reprieve as Swap rates ease a touch with the prospect that we are now closer to the top of the interest cycle than thought a few weeks ago.
The Bank of England must now exercise some restraint, with the chances of another 0.5% rise next meeting kicked into the long grass.
Now is the time to rest in our tents rather than tearing them all down.
Copy

Platinum
Elliott Culley
Director at Switch Mortgage Finance
Now the Bank of England have a decision to make. Inflation remains high, but it has dropped more than predictions. Swap rates are so volatile right now and recent positive news has led to swap rate rises cooling off. What happens next is so important for the housing sector. I think we will still see a rate increase in August, but the Bank of England might start thinking they don't need to go as high as 6.25% by the end of the year as has been predicted. This could lead to a reduction in swap rates and ultimately mortgage rates, but we are not out of the woods just yet. Ultimately there are signs the rate rises are working, so the hope will be this translates into the decision-making of Andrew Bailey and the committee.
Copy

Premium
Philip Dragoumis
Director and Owner at Thera Wealth Management
Finally some good news on inflation, or at least better than expectations. Expect the pound to come under pressure today and a rally in UK bonds. 6.9% core inflation is still high but at least it's heading in the right direction. The Bank of England should pause but won’t. Another three months like this and mortgage rates will look very different.
Copy

Mark Grant
Business Finance Adviser at The Business Finance Branch
Not only did headline UK inflation fall to 7.9%, lower than forecast, but crucially core inflation, stripping out volatile food and energy costs, also fell to 6.9% in June. Will this be enough for the Bank of England to hold interest rates at the August 3rd rate-setting meeting? The jury will be out for that. Ultimately, this data merely confirms prices are rising at a slower pace, but still rising at a high level year on year for businesses and consumers. This better than expected data is welcome but may not be good enough to prevent further interest rate rises and the increased cost of borrowing we have may already have set the economy on a course to recession in the near term. Many businesses I suspect will still not be feeling like the worst is over this morning.
Copy

Amit Patel
Adviser at Trinity Finance
Some welcome news just at the start of the school holidays. However, will this announcement be enough for the members of the MPC at the Bank of England to pause and reflect before making the sensible and right choice in pausing their agenda of rate hikes? I'm not too sure. They must pause with their narrative and bring welcome relief to millions up and down the country before it's too late.
Copy

Gary Boakes
Director at Verve Financial
This could be the most significant set of inflation data in years. For inflation to have fallen lower than expectation surely means the pressure is off the Bank of England, but the ball is now in their court. Hopefully, we will see a positive impact across markets and reductions in swap rates, which in turn could see a drop in mortgage rates.
Copy

Russell Maggs
Mortgage & Protection Adviser at Maggs Financial Services
This latest inflation data should provide a significant boost to the housing and mortgage market. The rate of inflation should now continue to fall in line with other developed countries and there is an opportunity for home movers and first-time buyers to take advantage of buying now whilst the market is flat-lining before it starts to pick up pace again in the coming months. The Bank of England should now hold the 5% base rate until the end of the year to give some stability in the markets. However, the days of super-low interest rates are behind us and we need to get used to living in a world of higher monthly mortgage payments. We're also likely to see increased options in the market to fix monthly payments for the term of the mortgage as you see in the US and on the Continent.
Copy

Jonathan Burridge
Founding Adviser at We Are Money
Let us all remember that one swallow does not a summer make. This news will be a great relief to all, especially the policymakers, but, we need to see more before we can start to make any judgements. If this is a trend, then we should start to see some easing of pricing, but let's not get too carried away just yet. Inflation is still too high, so the Bank of England's rate policy is unlikely to change and traders have responded ahead of this news, so any adjustment will be slow and incremental.
Copy

Gary Bush
Financial Adviser at MortgageShop.com
Clearly, it's now time for the Bank of England to rest a little in its next meeting on 3rd August, echoing what the US did recently, which should bring some calm to UK Plc. With core inflation also down to 6.9%, we are certainly going in the right direction. From the decision in two weeks, we'll see how related to the general public the members of the Monetary Policy Committee are.
Copy

Graham Cox
Director at Bridging Hub
Finally, some good news for the economy. Inflation dropping more than expected will give a boost to homeowners and would-be buyers alike. It's likely, the seemingly inexorable rise in mortgage rates over the past 8 weeks will now end, and possibly reverse a little. Certainly, expectations for the Bank of England base rate hitting 6 percent or more need to be revised down.