Inflation Dip in UK: What it Means for Mortgage Rates and Household Finances

The latest data from the Office for National Statistics (ONS) reveals that inflation in the UK was 10.5% in December, which is a slight decrease from the 10.7% reported in November. This marks the second consecutive monthly fall in inflation, which is a positive sign for the economy. However, it’s important to note that the largest downward contribution of the latest figure came from transport, clothing and footwear, and recreation and culture. While, rising prices in restaurants and hotels, and food and non-alcoholic beverages made tthe largest partially offsetting upward contributions.

The Bank of England hiked the base rate by 50 basis points to 3.5% from 3% in December, marking the ninth increase in a 12 month period. The next Monetary Policy Committee (MPC) meeting is scheduled for 2nd February, and the outcome of this meeting could have a significant impact on inflation and mortgage rates. The bank’s Monetary Policy Committee has a critical decision to make on February 2nd, and it seems highly likely that we’ll see a further increase in interest rates of 0.5%. This will hit households without a fixed-rate mortgage and with high levels of unsecured debt even harder as costs rise.

While inflation has caused real terms decline in wages by 2.6% in the three months to November 2022, among the largest falls since comparable records began in 2001. However, it’s worth noting that the recent fall in inflation could be a positive sign for mortgage rates going forward, but it all depends on the outcome of the next MPC meeting next month.

In conclusion, while the recent fall in inflation is a positive sign, its important to keep an eye on the outcome of the next MPC meeting and how it will impact inflation and mortgage rates. It’s also worth noting that high inflation and rising interest rates threaten to squeeze household finances further. Therefore, advisory firms should be agile, proactive, and innovative with solutions to alleviate the challenges faced by borrowers.

If you are looking for expert advice on how to navigate this challenging environment, speak to Prospect Tree Mortgages, an independent mortgage brokerage rated 5 stars by our customers. Our team of experts will provide you with the best solutions to meet you mortgage needs. Don’t wait, contact us today and get access to the best deals available to you and your unique circumstances.

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