Interest Rates Held: A Clearer Perspective

by Adam Tovey – Director | Independent Mortgage & Protection Adviser @ Prism Mortgage & Protection Advice

Read on for a straightforward overview of the latest updates on inflation and the Bank of England’s interest rate decision, to help you understand the potential impact on mortgages.

The Latest on Inflation

In May 2024, the inflation rate in the UK fell to 2%, the lowest it has been since 2021, and down from 2.3% the previous month.  This reduction in inflation has been influenced by decreased growth in energy and food prices, alongside other smaller factors.

This brings inflation in line with the Bank of England’s target of 2%.

What Does This Mean for Mortgages? 

The Bank of England’s fundamental purpose is to ensure that the prices of the things we buy do not increase (or inflate) at an unsustainable level.  Although inflation is now in line with the Bank of England’s target, analysts anticipate that a Base Rate cut is unlikely until at least August 2024.  Mortgage interest rates broadly follow suit with Base Rate movements. 

The Broader Outlook 

The overall economic outlook appears cautiously optimistic. The UK has recently emerged from a recession, with Rishi Sunak, the Prime Minister, feeling this would be a good time to call a General Election, highlighting that “brighter days are ahead” and emphasizing the stabilisation of the economy as a key part of his government’s platform. It is also worth noting that the International Monetary Fund has slightly uplifted its growth forecast for the UK – although, interestingly, it has advised against further tax cuts to avoid putting additional strain on public finances. 

Moving Forward

While the prospect of lowering interest rates appears to have been pushed back, falling inflation is a positive sign that the UK’s economic measures are stabilising the market.  Of course, it remains to be seen how the General Election will impact this seemingly positive outlook, but it does feel like the clouds are parting. 

As always, it’s essential to stay informed – the fluctuating economic landscape directly influences mortgage rates. 

We’ll continue to update over the coming months as things unfold. 

Keep an eye on our blog and please do get in touch with any questions.

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