Data out today showed the rate at which goods and services have risen in price over the last year, according to the Consumer Prices Index (CPI), slowed once again in November and is down from 4.6% in October.
The Bank of England (BoE) had been increasing interest rates in a bid to bring down inflation, so the fact it is nearing the target of 2% indicates this plan has been working.
It comes just days after the BoE voted to hold interest rates at 5.25% for the third consecutive time.
Meanwhile, fixed-rate mortgages have been falling in price for several months. According to Moneyfacts.co.uk, the average two-year fixed mortgage rate is now at 5.95% and the average five-year fixed residential mortgage rate today is 5.57%.
But some of the best rates on the market are now well below 5%. According to L&C Mortgages some two- and five-year rates have fallen back to well below 5 and 4.5% respectively.
And mortgage experts think today’s inflation data could drive these rates down further.
David Hollingworth, associate director at L&C Mortgages, said: “Competition between lenders remains strong in a housing market with lower activity levels.
“As market expectation of the chance for the next move in base rate to be down has grown, lenders have passed through improvements in funding costs.
“Today’s news is likely to further that trend, which could soon see five-year fixed rates soon closing in on the 4% marker.
“That would be a big boost for homeowners coming towards the end of their current, low fixed rates and bracing themselves for the inevitable hike in monthly payments.
“Although these rates are still way higher than the lows of recent years when both 2- and 5-year rates were at one point available around 1%, it will at least feel a little more manageable than the peaks we saw during the volatility of the summer.
“However, the Bank of England has warned that it won’t loosen policy and cut rates until inflation is back on track and there’s still some way to go for that to happen.”
His view was echoed by Michelle Lawson, director at Farnham-based independent mortgage broker, Lawson Financial. Speaking via the Newspage agency, she said: “This fall is quite a significant drop from the last figures and great news all round. Borrowers and bricks and mortar should benefit from this better than expected inflation data.
“The Bank of England may start bringing the Base Rate down sooner than expected in 2024. A great and positive end to a rollercoaster year for borrowers and the property market.”
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