Inflation held firm in September but remains above the Bank of England’s 2% target. Find out what this could mean for mortgage interest rates.
The UK’s annual inflation rate came in at 3.8% for September, according to the latest figures from the Office for National Statistics. This remains unchanged from August’s figure and is slightly below the market forecast of 4%.
Inflation remains almost double the Bank of England’s 2% target. However, this latest figure has sparked some relief as there were some predictions of inflation going up. If prices continue to stabilise, it’s unlikely the Bank of England will need to raise interest rates again. The Office for National Statistics said that airfares and fuel costs caused the increase. Increased food prices and household bills have also caused the inflation rise.
Services inflation – covering things like hospitality, insurance and transport – remains high at 4.9%. There is hope that this will ease as the impact of this year’s higher minimum wage and national insurance changes begins to fade.
What does this mean for mortgage rates?
For anyone with a mortgage – or thinking of buying a home – steady or falling inflation is generally good news. It reduces the likelihood of further Bank of England base rate increases, which in turn helps keep mortgage rates stable.
If inflation continues to edge lower in the coming months, lenders may gain more confidence to offer better fixed-rate deals, particularly if the Bank of England signals that interest rates have peaked.
The bottom line
Inflation may still be higher than we’d like, but the latest figures show progress in the right direction. Stability in prices brings stability in borrowing costs, which is welcome news for home buyers and movers.