Inflation falls to lowest level in two years – what does this 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 November’s inflation rate stood at 3.9% – down from 4.6% in October. This news follows the Bank of England’s decision earlier this month to continue holding interest rates at 5.25%. 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 considerable 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 among 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:

“November inflation figures and mortgage approvals should indicate an overall cooling off of the UK economy which, if we are to avoid a recession next year, must be acknowledged by the BoE and, in an effort to avoid a sudden crash of inflation, will increase pressure on the MPC to start reducing interest rates sooner rather than later.

“Economies have momentum, with the rate of inflation continuing its downward trajectory towards the BoE’s threshold of 2% – the MPC must look ahead to the new year and start thinking about the optimum time to cut rates. Research from Rightmove last week found that housing prices are tipped to continue falling by the end of the new year, implying that prospective buyers will still be put off by high mortgage rates. I’d urge the MPC to seriously consider cutting the interest rate in their next meeting, even a reduction by a quarter percentage point would signal optimism within the UK economy, with a target base rate of 3-3.5% being the overall goal if the BoE want to truly prioritise prospective buyers in the new year.”