Inflation, mortgages and the property market

All the stars have aligned for a Christmas miracle as we head closer to the 2% inflation target. The fall was greater than expected and has increased the likelihood of rate cuts in 2024. Mortgage lenders will be gearing up for January sales, which be music to the ears of those borrowing in 2024 and should help boost the property market.

This fall is quite a significant drop from the last figures and great news all round. Borrowers and bricks and mortar should benefit from this better than expected inflation data. The Bank of England may start bringing the Base Rate down sooner than expected in 2024. A great and positive end to a rollercoaster year for borrowers and the property market.

This is great news for borrowers, small businesses and the wider public, but more worryingly it shows how out of touch the Bank of England is only a week from their commentary about holding rates higher for longer. As soon as Labour win power, Bailey will be getting his P45. his tenure has been riddled with poor predictions and bad strategy.

Lots of positives for the mortgage market here. Predictions are saying that May will see at least a 0.25% reduction in rates but drops in inflation could help us see those reductions much sooner. It also reduces the chances of more rate hikes. The competition from high street lenders will start to heighten as they scrabble for business with rate wars likely coming in again January and through the first quarter. This could be a good time for borrowers again after a very unstable 12-18 months. This is a pre-Christmas boost for borrowers.

The latest CPI reduction to 3.9% for November 2023 is a welcome Christmas bonus for the mortgage market, supporting the recent drop in swap rates, which signal an anticipated interest rate cut. This decrease in CPI, along with a decline in core inflation rates, suggests a potential stabilisation in mortgage pricing, offering significant relief to homeowners affected by rising rates. The Bank of England might now contemplate a more cautious approach to interest rates, potentially leading to a reduction in late Q1 or early Q2 of 2024, while keeping an eye on energy and retail trends. This positive turn is beneficial for the property market, as more predictable mortgage costs would support buyers and investors. Overall, these figures indicate a softening of inflationary pressures, potentially ushering in a period of stability for both the mortgage and property sectors, in tune with the festive season's cheer.

This is a significant reduction in the inflation rate, more than most predicted. With inflation slowing across all the matrices measured, this is the most impressive drop we have seen this year. This will inevitably send a message to the Bank of England to consider base rate cuts sooner, more likely the first quarter of 2024. This will also bring SWAP rates down quickly as the markets almost certainly react positively. Fixed rates will inevitably be priced much cheaper, supporting the expected early 2024 push from lenders, which will also bode well for property prices. It's the Christmas bonus we were not expecting.

This is a bigger-than-expected drop in inflation, with transport leading the way. The 2% target seems within touching distance now, and will surely put pressure on the Bank of England to ease up rates, possibly in February, at the first opportunity. Owner Occupiers Housing costs (OOH) also seem to have peaked, with a slight drop. With mortgage lenders battling away in their pricing war, it may be that the savage increase in mortgage repayments for the circa 1.4m ultra-low fixed rates maturing in 2024 may be a lot softer than anticipated.

This better-than-expected inflation data is the Christmas gift that nobody asked for, but that everyone is pleased to receive. This is fantastic news and is the clearest sign yet that things are improving. SWAP rates and mortgage rates are likely to continue on their downward trajectory, meaning that the likelihood of seeing mortgage rates beginning with a three could come sooner than expected. It has to be noted that this data indicates a real need for change in the MPC after three members voted for an increase at the last meeting. There may be a couple of bumps ahead early next year, but for now, this is the best Christmas gift ever. The property market and borrowers will go into 2023 with a spring in their step.

The good news just keeps coming. Today’s headline that inflation has eased to its lowest annual rate for over two years is another tick in the box for an economy that seems to be improving, slowly but surely.
We have to be careful not to get too carried away as the current rate is still well above what it was a few years ago, and still adrift of the targets we need to hit, but it’s a marked improvement. and it should add fuel to the fire of positive vibes as we head into 2024.