Blog Post
Inflation and interest rates: big improvement from a year ago
Tom Simper
Nov 11, 2024, 11:00 AM
The Bank of England cut rates to 4.75%, a welcome further boost to sentiment for the housing market.
640,000 mortgage holders on trackers will feel the immediate boost to their finances and an additional 770,000 on a standard variable rate should see at least some of this cut passed on.
The other welcome message from this latest cut is that inflation is back in target, welcome relief for household budgets. The latest inflation rate (CPI) is 1.7%, which this time last year was 3.9% and 18 months ago was 8.7%.
In terms of the long term outlook for interest rates, the 5 year swap rate gives us a good indication of this and is the basis for pricing of fixed mortgages.
The current swap rate is sitting just above 4%; having drifted a little higher over the last week due to some inflationary pressure expected from changes announced in the Budget.
The residential market has been through an adjustment phase, responding to higher interest rates. Improvement in these rates over the last year is very welcome but with swap rates stabilising around 4% this could well become the new normal. Source: PriceHubble, ONS, Bank of England, Investing.com. Latest inflation and mortgage data is to September 2024.
Leave a comment