Inflation Rate Predictions: Stable Inflation and Potential Rate Cuts
Inflation rate predictions indicate it is anticipated to hover around 2% when June’s figures are released this week. This stability could pave the way for further interest rate cuts in the coming months. Currently, there’s a 50% chance that the Bank of England will lower the base rate in August. If this does not occur, a reduction is likely in September. The consistent inflation rate, which aligned with the Bank of England’s target in May, is encouraging news for those who switched to variable-rate mortgages earlier this year. However, significant rate adjustments are not expected swiftly, with only a few cuts forecasted for 2024.
Impact on the Mortgage Market
A Gradual Shift in Rates
Sarah Coles, head of personal finance at Hargreaves Lansdown, observes that while the mortgage market may not experience drastic changes, some lenders have already begun to slightly reduce fixed rates. Competitive pricing ahead of the school holidays and potential rate cuts is driving this trend. For homeowners facing a remortgage, Coles advises locking in a rate now to secure a favourable deal. This strategy allows for the flexibility to switch to a better offer if rates decrease or to maintain a beneficial rate if they rise.
Inflation Rate Predictions: Competitive Pricing Among Lenders
Pre-Holiday Rate Adjustments
In anticipation of the summer holidays and possible rate reductions, some lenders are proactively cutting fixed rates. This pre-emptive action aims to attract borrowers in a competitive market. Although the overall impact on the mortgage market might be modest, these slight reductions provide an opportunity for borrowers to secure advantageous terms.
Strategic Remortgaging
For those needing to remortgage, the current market conditions offer a strategic advantage. By locking in a rate now, borrowers can protect themselves against future rate increases while retaining the option to switch to a more favourable rate if reductions occur. This approach ensures that homeowners can maintain financial stability and potentially benefit from future rate cuts.
Future Economic Outlook
Predicting Rate Movements
Meeting the Bank of England’s target inflation rate in May positively indicates the economy. However, the path to significant rate movements will likely be gradual. Only a couple of cuts are predicted for 2024, suggesting a cautious approach by the Bank of England. This careful strategy aims to balance economic growth with inflation control, ensuring long-term stability.
Implications for Borrowers
For borrowers, this steady approach means that while immediate significant changes are unlikely, there is still potential for incremental improvements in mortgage rates. Stay informed about market trends and be ready to act swiftly to take advantage of any favourable changes.
Inflation Rate Predictions: Conclusion
In summary, the expected stable inflation rate of around 2% presents a promising outlook for potential rate cuts in the near future. While the mortgage market may not see drastic changes, slight reductions in fixed rates by some lenders provide an opportunity for borrowers to secure favourable deals. For those remortgaging, locking in a rate now offers flexibility and protection against future rate fluctuations. The overall economic outlook suggests a cautious but positive trend towards stability and gradual improvements in mortgage rates.
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