As expected, interest rates have remained stagnant at 5.25% in June 2024, despite the recent announcement of lower than anticipated inflation.
The forthcoming UK parliament election is overshadowing other news at the moment, and creating a degree of uncertainty, which tends to lead to a more cautious approach when it comes to economic decisions.
However, with the Consumer Prices Index (CPI) falling to 2% from a high of 11.1% in 2022, we are feeling more optimistic that an interest rate reduction can’t be too far away. Inflation is now at the government’s target level.
To keep inflation low and stable, the Government sets us an inflation target of 2%. This helps everyone plan for the future. If inflation is too high or it moves around a lot, it’s hard for businesses to set the right prices and for people to plan their spending.
Bank of England
Inflation in the service sector has not fared as well, and that metric will be one of the key factors holding the Bank of England back from making cuts.
According to Thomas Pugh, an economist at RSM UK, said: “Services inflation, which is a better measure of underlying price pressures in the economy than headline inflation, missed expectations again, only slowing to 5.7% against expectations of 5.5%.”
The next decision on interest rates will be on 1 August, which gives the dust time to settle after the election. Predictions are mixed but there appears to be a possibility of a small cut at that point and another one later in the year.
In terms of the mortgage market, lenders will be poised to move their rates in August and property sellers may be tempted to hold off until the end of the summer before they put their house on the market. The effect is likely to spread the usual peak sales period into the autumn. This could potentially help sellers who decide to go ahead sooner as there will be less competition, which is important if buyers decide to hold off and wait for lower mortgage rates.
Overall, while there is no actual good news for those who want to take out a mortgage now, or those whose mortgages renew in the next few weeks, but we are feeling a lot more positive about the likelihood of reductions in the autumn of 2024.
If you want to talk over your mortgage options, please have a chat with us, as we can help you find the best deal for your individual situation.