As Inflation Dips, What does it mean for the Property Market?

As two-year fixed mortgage rates begin to edge below 5% – could we be witnessing a return to a buyer’s market?

David Hannah, Chairman of Cornerstone Tax, discusses what today’s news means for prospective first-time buyers

Today’s data from the Office for National Statistics (ONS) has revealed that the UK’s annual inflation rate has fallen sharply to 4.6% – down from 6.7% in September. This news follows the Bank of England’s decision to continue to hold interest rates at their current level of 5.25% after fourteen consecutive hikes beginning in December 2021 and ending in September of this year. As inflation continues to fall, pressure is easing on the BoE to pursue further hikes to interest rates as the UK economy maintains its strong recovery. David Hannah, Chairman of the UK’s leading property tax experts, Cornerstone Tax, asserts that the BoE should look to reduce interest rates at their next meeting in a bid to encourage prospective first-time buyers to take their first step on the housing ladder.

Since the BoE’s initial decision to pause interest rate hikes, the UK’s mortgage market has shown significant signs of recovery. This past week has seen major lenders across the country offering a new range of mortgage deals, with Halifax, First Direct and HSBC being amongst the banks that are slashing their rates and offering deals below 5%. Alongside the continued trend of a nationwide year-on-year fall in house prices, property experts are asserting that hope may be on the horizon for prospective first-time buyers.

According to David Hannah, today’s announcement from the ONS should provide a stroke of confidence to the BoE’s Monetary Policy Committee ahead of their next meeting in December, asserting that policymakers ought to prioritise first time buyers by further reducing interest rates to 4.75% in a move that would allow the housing market to recover whilst also delivering greater opportunities for those looking to escape an overheated rental market.

Chairman of Cornerstone Tax, David Hannah, comments:

“In the next few months we should expect to see a flurry of activity within the housing market, as mortgage lenders continue to slash their rates and house prices continue to fall across the country. First-time buyers should be especially emboldened to look towards taking their first step on the housing ladder as opportunities continue to crop up.

“I hope that we will see the BoE cut interest rates by half a basis point at their next meeting – this would catalyse activity in the housing market and allow for somewhat of a soft landing rather than a potential crash. Additionally, easing the interest rates might bolster consumer confidence, encouraging investment and spending in various other sectors, stimulating economic activity at a time when the UK most needs it.”