Inflation Rates

In October 2022, inflation hit the highest rate for 41 years, 11.1%. However, at the start of 2024, it was 4% and has further fallen to 3.4% in February. This is the lowest rate since September 2021, when levels began increasing rapidly. 

Inflation began to fall due to the price decrease in goods, such as the lower cost of energy prices compared to previous years, and the slower increases in the cost of food in recent months. The Bank of England predicts that inflation will continue to fall. They expect rates will drop below the 2% target in the middle of 2024. 

Will Interest Rates

Be Cut?

The Bank of England governor has indicated that markets are correct to assume there will be more than one interest rate cut this year, he stated he is increasingly confident inflation is heading towards target. 

Rates have risen from 0.1% in December 2021 to the current rate of 5.25%. The rate is at its highest level since 2008. Consequently, there has been limited economic growth due to the reduced demand for goods and services. The committee has since left rates unchanged, including at the March meeting. 

According to The Guardian, economists predict that the Bank of England’s Committee will respond to falling inflation by reducing its standard interest rate from 5.25% to 4.5% by the end of 2024. The first-rate cut is expected to occur after policy meetings in June or August, but expectations can quickly change. 

Another effect of decreasing inflation is that property values are likely to stabilise or grow at a slower rate, creating more security and reducing the risk of a property bubble. Investors can feel more confident about long-term investments knowing the market is more stable.

Rent prices will also become more stable which will attract many new renters who previously did not want to take the risk but can not yet afford to buy. This means landlords will receive more interest from potential tenants. This benefits investors as it will create a more stable and reliable income for investors.

Overall, the decrease in inflation can lead to a cut in the BoE base interest rate, increased affordability for loans, a stabilised property market, a more secure rental market, and steadier returns for investors. This combination of factors can create a more sustainable and attractive property market in the future years.