How Cooling Inflation Affects House Prices and Mortgage Rates

Inflation in the UK has dropped to its lowest level in nearly three years, reaching 2.3% in April, down from 3.2% in March, as reported by the Office for National Statistics (ONS). This figure is close to the Bank of England's target of 2% but still higher than economists' expectations of 2.1%. Despite this cooling inflation, it is unlikely that the central bank will cut interest rates, which have been held at 5.25% since last August. As a result, mortgage rates are expected to stay between 4.5% and 5% through 2024, according to Richard Donnell from Zoopla.

The housing market has remained stable, with house prices rising 1.8% over the past year, according to the HMRC Land Registry, bringing the average UK house price to £283k. This marks the first annual increase since last June. While private rents have cooled from their record highs earlier this year, the overall sentiment in the housing market remains positive. Housebuilders are responding to increased demand by planning to build more homes throughout the year.

Experts like Matt Smith from Rightmove and Myron Jobson from interactive investor highlight that while lower inflation helps maintain the value of money and potentially increases purchasing power for homebuyers, other factors such as wage growth and economic conditions will also play significant roles in shaping the future of mortgage rates and the housing market.

For more detailed insights, read the full article on City A.M..