The inflation target is finally hit but don’t expect a base rate reduction just yet.

The mortgage market in June 2024 has been steady compared to previous months but we are yet to see the big rate reductions we have been hoping for.

There was good news with the announcement that the UK inflation figure (CPI) had finally hit its target of 2% in May, this is down from 2.3% the previous month. The Bank of England erred on the side of caution and decided to hold the base rate at it current level of 5.25. The upcoming General Election may have influenced this, but they may also want to see inflation stay at its target of 2% for a longer period.

Average mortgage rates have reduced in the past month, with Barclays announcing last week a market leading 5-year fixed product at 4.23%.    Several lenders have also announced rate reductions this week.  Swap rates have reduced by around 0.25% since the start of the June however they have been increasing over the past week so we may find the current rates on offer are the best there will be for the next month or so.

House price growth

House price growth has slowed significantly compared to previous years with Nationwide reporting a modest 1.3% annual growth in May 2024. This is as expected considering the high interest rates over the past 12 months. We have noticed an increase in market activity in our local area, especially since March however, a return to significant price increases is unlikely until there are substantial cuts in interest rates by the Bank of England and reductions in mortgage rates.

Looking Ahead to the Summer

The upcoming General Election is sure to add uncertainty to the market but with the results to be announced this week, and with Labour widely expected to win, most experts believe the impact will be less significant to the housing market than the path of interest rates.

While the Bank of England held steady in June, there are expectations of a base rate cut in August when they next meet. The next set of inflation figures are due on the 17th of July and, if these are positive again, this could help sway the Bank of England’s decision on cutting the rate in August.