Interest Rate Expectations After Unexpected Inflation Figures – December 2023

The Office for National Statistics (ONS) has released the latest inflation figures for December 2023. 

Inflation in the UK increased slightly to 4% in December 2023 up from 3.9% in November 2023. This was the first rise since February 2023 and it was driven by higher prices of tobacco and alcohol. Most economists had predicted a slight decline in inflation, but they were surprised by the unexpected increase. 

Ruth Gregory, deputy chief UK economist at Capital Economics said ‘she expected inflation to fall below Bank of England 2% target by April, which will allows them to cut interest rates by June’.

The money markets are now anticipating the first cut to the base rate in June, and they expect it to fall to 4.25% by the end of the year. 

How does this affect the mortgage market?

Despite the higher inflation figures, mortgage lenders are still reducing rates. After the ONS report was released, Santander joined Coventry and Leeds Building Society, by reducing their fixed rates up to 0.45%, while Skipton cut them by up to 0.35%.

This has been the trend in 2024, with some lenders adjusting their rates downwards four times already this year. This applies to both the major high street lenders and the smaller and specialist lenders. 

With the market changing daily it is important to receive advice on securing the best mortgage for you. Contact us or call 01628 564631 for a consultation with one of our team members.

The information contained within was correct at the time of publication but is subject to change.

Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage.

Source: BBC News