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January inflation data "could be a win for borrowers"

ended 14. February 2024

The January inflation data is out and it has shown the Consumer Prices Index (CPI) rose by 4.0% in the 12 months to January 2024, the same rate as in December 2023. Full report >> here <<, key points below. Newspage asked brokers how this could impact mortgage pricing and demand for property. Their views can be found, bottom..

  • The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 4.2% in the 12 months to January 2024, the same rate as in December 2023.
  • On a monthly basis, CPIH fell by 0.4% in January 2024, the same rate as in January 2023.
  • The Consumer Prices Index (CPI) rose by 4.0% in the 12 months to January 2024, the same rate as in December 2023.
  • On a monthly basis, CPI fell by 0.6% in January 2024, the same rate as in January 2023.
  • The largest upward contribution to the monthly change in both CPIH and CPI annual rates came from housing and household services (principally higher gas and electricity charges), while the largest downward contribution came from furniture and household goods, and food and non-alcoholic beverages.
  • Core CPIH (excluding energy, food, alcohol and tobacco) rose by 5.1% in the 12 months to January 2024, down from 5.2% in December 2023; the CPIH goods annual rate slowed from 1.9% to 1.8%, while the CPIH services annual rate rose from 6.0% to 6.1%.
  • Core CPI (excluding energy, food, alcohol and tobacco) rose by 5.1% in the 12 months to January 2024, the same rate as in December 2023; the CPI goods annual rate slowed from 1.9% to 1.8%, while the CPI services annual rate increased from 6.4% to 6.5%.

16 responses from the Newspage community

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Andrew Montlake
Managing Director at Coreco
It says something when inflation figures that show no change are cheered. The latest set of figures will cause a collective sigh of relief from many. The rollercoaster ride down to the 2% inflationary target is still on track, and we may see some of the previous day’s increases in SWAP rates reverse once more. This may be enough to pause further rate rises for the time being but there are more internal and global factors that the markets and the Bank of England will be watching carefully, especially whether a tight labour market is starting to ease.
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Michelle Lawson
Director at Lawson Financial
This is a pleasant surprise when the forecasts were for an increase. With mortgage rates increasing over the past fortnight or so, we should hopefully see rates stabilise or even edge down slightly as confidence grows. It will be interesting to see how this is interpreted by the Bank of England at the next Monetary Policy Committee meeting on 21st March. But overall, this could be a win for borrowers.
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Katy Eatenton
Mortgage & Protection Specialist at Eatenton Finance
Inflation remaining steady is better news than expected. Mortgage rates and swap rates have been edging up over the past couple of weeks, so hopefully this will help stabilise things and encourage lenders to start pricing downwards again. While we all want to see inflation continue its downward trajectory, it was never going to be in a straight line. For the mortgage and property markets, this is better news than expected.
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Rohit Kohli
Director at The Mortgage Stop
Today's inflation figures, revealing a consistent CPIH and CPI at 4.2% and 4.0% respectively over the past year to January 2024, is a welcome sign of stability given the predictions of rise. This steadiness, in the current economic climate, suggests lenders' concerns over an abrupt inflation increase may be temporarily allayed so may bring a period of stable mortgage rates. Meanwhile, core inflation rates holding firm indicate a more controlled economic environment, but with the Fed delaying any changes to interest rates in the US it suggets the Bank of England may opt to keep the base rate steady much longer than anticipated.
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Elliott Culley
Director at Switch Mortgage Finance
Although inflation is still running higher than the overall target of 2%, no change in the latest data will actually be seen as a positive considering a rise had been expected. Ideally this allows lenders to keep rates as they are, as there were fears of large increases had the data shown inflation had increased. All eyes will now move to the financial markets to see how the latest data shapes the month ahead for borrowers.
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Peter Stamford
Mortgage Expert at Stamford Home Finance
Inflation holding steady at 4% is welcome given that expectations were for an increase and the data suggests a stable and more positive economic outlook. January's CPI data suggests consistent prices, surely guiding the Bank of England to maintain the base rate at its current level for the time being and avoid any hikes. For those eyeing homes, this means mortgage rates might stay steady. Optimism prevails as we begin to exit winter.
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Riz Malik
Independent Financial Adviser at R3 Wealth
The journey to 2% inflation was never going to be a straight line but for the rate to stay the same given the consensus was a slight rise. Inflation is a key factor that will influence the Bank of England's timing of a rate cut, another is wage growth. Given the US inflation numbers came in hotter than expected, it is likely the Federal Reserve will delay their cuts, which means ours will likely follow suit. As far as the mortgage market is concerned, this could reverse some of the rate cuts seen in January.
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Ben Perks
Managing Director at Orchard Financial Advisers
When US inflation figures broke yesterday, the general feeling was to ‘strap in’ and ready ourselves for this morning's press. For us, rate of inflation has remained the same. Not the reduction some were hoping for, but it’s better than our friends across the pond. Experts will now be frantically combing through data searching for reasons for remaining at 4%. This serves as a stark reminder that the road to 2% inflation is a bumpy one. We’ll get there this year and mortgage prospects will improve, but it’s not going to be a straight forward journey and there are no short cuts to be had.
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Imran Hussain
Director at Harmony Financial Services
This is welcome news and hopefully will put a halt to mortgage rates edging up slightly and being so volatile, offering some stability to borrowers.
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Justin Moy
Managing Director at EHF Mortgages
Whilst this is better than most predicted, recent increases in the SWAP market will be slow to reverse over the coming weeks. The US economy has a major influence on our own performance and the higher inflation announced yesterday will make it even more tricky to predict the next few months. Cautious optimism, but it may just take a bit more time to see that first base rate cut.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
January typically sees an increase in inflation as certain items increase in price, for example some insurance premiums go up every January. However, this is bad news for the mortgage market. At the last MPC meeting, two of the panel voted to increase rates, in stark contrast to what the majority of the public and politicians want. The inflation figures suggest that rates will stay high for longer and won't come down until the summer.
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Craig Fish
Director at Lodestone Mortgages
This is certainly unexpected, and positive news, but on its own it won't change the possibility that the Bank of England may hold rates higher for longer. Wages and employment data are just as important and if they look hotter than expected then an early rate cut is off the cards. The eyes of the MPC seem to be set on the Fed in the US, as it's likely that when they make their first move (which could be a while) its likely that the UK will, too.
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Graham Cox
Director at Bridging Hub
A mixed bag overall. Good news that the headline CPI rate is unchanged at 4%, when expectations were for an increase. However, the Bank of England will be concerned that inflation in the services section, which makes up 80% of GDP, increased a tad to 6.5% from 6.4%. Until this figure falls significantly, inflation will remain stubbornly above the 2% target.
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Gary Bush
Financial Adviser at MortgageShop.com
The inflation news today, holding its position at 4%, proves again that predicting the numbers in the UK, based upon what's happening across the pond in the US, isn't always practical. It's the news that the population needs and will lead us to a Bank of England base rate hold again, at the next monetary committee meeting, and potentially bring about that very much-needed drop in rate in the short term. Having seen the all-important Swap rates increasing for the last week hasn't been a comfortable ride which has led to lenders changing their rates twice in a week in chaotic decrease-increase movements. We predict a further increase in the average price of properties to be reported, on the back of this news, as this further stability will remove some psychological barriers from potential homebuyers.
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Gareth Davies
Director at South Coast Mortgage Services
Better news than I’d expected, but not earth-shattering. Let’s see if this calms down the swaps for a while.
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Akhil Mair
Director at Our Mortgage Broker
In the wake of soaring inflation rates in the USA, the UK finds solace in holding steady. Approaching the 2% target offers a momentary relief, but the journey to economic stability is far from linear. Controversy swirls around this apparent calm: Is it a fleeting respite or a sign of deeper issues? As we navigate uncertain waters, let's acknowledge the complexities and confront the challenges head-on. The road to progress is rarely smooth, but facing controversy is essential for charting a course toward lasting stability.