The UK’s yearly Consumer Price Index (CPI) inflation rate declined from 8.7% in May to 7.9% in June, surprising economists who had predicted it to be around 8.2%. This significant drop in inflation comes as a considerable relief for policymakers.
It is noteworthy that this is the first time in quite a while that the inflation rate has been lower than expected. Moreover, the Core CPI inflation, which excludes volatile items, also experienced a decrease, falling to 6.9% from 7.1% in May.
Andrew Montlake, MD of mortgage brokers Coreco commented, “These inflation figures will come as a relief to everyone, and whilst we are not out of the woods as yet, we have at least reached a clearing where we can safely pitch our tents and rest.
“I suspect we will see a slight reprieve as Swap rates ease a touch with the prospect that we are now closer to the top of the interest rate cycle than thought a few weeks ago.
“The Bank of England must now exercise some restraint, with the chances of another 0.5% rise next meeting kicked into the long grass.
“Mortgage holders will be hoping common sense prevails and the Bank does not go further at this moment in time.
“Whilst this may not yet mean we see a wholesale fall in mortgage rates, lenders should at least now move away from sudden rate hikes and also enjoy a period of calm reflection.”