Inflation eased to 2.3% in the year to April, down from 3.2% in March, the Office for National Statistics (ONS) announced this week, providing some relief to those struggling to manage rising living costs.
However, economists had predicted that it would fall further, so the drop was not as great as expected, even though it brings inflation to its lowest level in nearly three years. Inflation is the rate at which prices for goods and services rise, so when it falls, it doesn’t mean that prices are going down – just that on average they aren’t increasing as quickly as they were previously.
The current inflation rate remains higher than the government’s 2% target, and many expect the Bank of England will want to see a sustained period of lower inflation before it will consider reducing the base rate. That means that while there have been predictions that we could see a base rate cut as early as June, it now looks more likely that we could see one in August, although of course there are no guarantees.
Should you takeout a mortgage now or wait?
Lots of people will be holding off making a decision on their mortgage in the hope that rates will come down further, but lower inflation will already have been priced into fixed rate mortgages, so it’s unlikely that we’ll see any sharp fall in rates any time soon.
Swap rates, which are the rates at which lenders can borrow funds on the wholesale market for the duration of the mortgage term, have actually edged up in response to the latest inflation data, which may indicate that markets believe the base rate will remain higher for longer.
L&C data shows that the average two-year fixed rate offered by the top 10 lenders dropped from 5.40% in November 2023 to 4.46% at beginning of February this year, but has now risen to 4.94%.
Given that rates are constantly fluctuating, it’s worth using our Rate Check service, which enables you to secure your mortgage deal up to six months in advance, and then review it again before completion. This means that if rates go up before you need your mortgage to start, you’ll have peace of mind that you’ve got a good deal. If they comedown, however, your adviser can carry out a Rate Check to ensure that the deal you’re signing up for is the still the best one for you. If it isn’t, they’ll search the market for a better option and help you to switch.
