Does the inflation dip represent a drop in rates?

Date: 26 Jan 2023

Vicente Luckina Bunn

Inflation dip: comment from brokers and IFAs on what this might mean for mortgage rates.

Inflation has dipped for the second month in a row. Will this mean there’s less pressure on the Bank of England to raise the base rate? Mortgage brokers and IFAs were asked what impact the inflation dip might have on mortgage rates.

Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages:

“It’s a positive sign to finally see inflation falling. However, it’s still only a small drop and there is certainly some way to go to reach the 2% target,  so we could still see further increases in the base rate until inflation starts to fall at a quicker rate. Fixed rates continue to fall and we could start to see some low 4% deals materialise and, if we’re really lucky, high 3s.”

Riz Malik, director of Southend-on-Sea-based R3 Mortgages:

“Inflation has declined and should continue to decline. However, we are not out of the woods yet. Even with this data, I would be surprised if the Bank of England does not raise interest rates again at least once in the coming months. Lenders are lowering rates to attract new business by reducing the margins they previously built into their products. This trend will continue but do not expect mortgage rates to return to the good old days.

Justin Moy, founder at Chelmsford-based mortgage broker, EHF Mortgages:

“Inflation will take more time to see a significant fall, as rising food costs in particular continue to keep the rate above 10%. For mortgage rates, this news won’t make a huge difference, although everyone will be fearing the Bank of England announcement later this month on Base Rate. A month-off any rate increase would be useful! Fixed rates continue to slip, rather than slide, as many of the lenders align their deals against their peers. No one is brave enough to stick a sub-4% fixed deal on the market just yet, but if a few lenders decided to do the same on any given day, that would work nicely. But enquiry numbers are starting to improve this year so far, which is a big positive.”

Rhys Schofield, managing director at Derbyshire-based mortgage advisors Peak Money:

“Funnily enough, the back seems to have been broken on inflation not because the BOE successfully made normal peoples lives difficult with rate rises but because a lot of stuff such as gas and fuel had got a lot cheaper on a global level. You have to question was it, and is the misery worth it?”

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