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UK Inflation And Property Finance: A Look Beyond the Numbers

UK Inflation And Property Finance: A Look Beyond the Numbers - The Bridging Group

The October drop in UK's inflation to 4.6% has sparked discussions across property finance circles. This decline, attributed largely to lower gas and electricity prices, has surprised many, reaching a two-year low and surpassing economists' expectations.

While the implications of this dip in inflation are far-reaching, what does it mean for UK property finance, and how might it influence the broader financial landscape?

According to Danni Hewson, AJ Bell's head of financial analysis, the significant month-on-month decline in the Consumer Price Index (CPI) hasn't been this steep since 1992. This news could be seen as a positive development for mortgages, noting that the better-than-expected inflation data may contribute to the ongoing drop in fixed mortgage rates.

Major players like Halifax and HSBC have already joined the trend, with two-year fixed rates slipping below 5%, and five-year rates approaching 4.50%.

However, amidst the optimism, it's essential to acknowledge the varying opinions within the Monetary Policy Committee (MPC). While some, like Simon Webb, managing director of capital markets and finance at LiveMore, find the inflation news encouraging, concerns persist about the divided stance within the MPC. This divergence in views leaves the base rate at 5.25%, despite the downward trajectory of inflation. A reduction in the base rate might also still be a distant prospect.

The government's achievement in halving inflation is noteworthy, yet Andrew Gething, managing director at Morgan Ash, emphasises that the elusive 2% target remains distant. The hope is that today's news could influence the Bank of England to maintain rates during the next MPC meeting, but uncertainties linger, especially if the economy faces unforeseen shocks.

Despite the recent dramatic fall, living costs for UK households continue to rise considerably. As winter approaches, energy bills are expected to increase, potentially stabilising inflation around the 4% to 5% mark.

In summary, the recent inflation figures have implications beyond the immediate financial landscape. While mortgage and bridging loan rates may see further improvements, the divided opinions within the MPC and ongoing economic uncertainties suggest a cautious approach. As households navigate the persistent challenges of rising living costs, the hope is that the downward trend in inflation will offer some relief in the long term.


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