What does the latest inflation data mean for the market?

Brokers react to latest inflation data

What does the latest inflation data mean for the market?

Annual inflation fell to 7.9% in June from the previous month’s 8.7%, according to the Office for National Statistics (ONS).

While this decline is a positive one, some experts believe that the figure is still not low enough to stop the Bank of England from increasing the base rate further.

Mortgage Introducer has sought the views of a number of brokers .

Positive news for all

Lewis Shaw (pictured), founder of Shaw Financial Services, believed this inflation data was positive news for everyone, mortgage holder or not.

“While the UK still has one of the highest inflation rates in the G7, and there is still a long way to go, to see headline Consumer Price Inflation (CPI) fall and, crucially, core inflation reduce, albeit by a smaller margin, is something we have all been hoping for,” Shaw said.

He added that this should mean the Bank of England only raises rates next month by 0.25%, so a major win for mortgage holders.

“I am going out on a limb here to say fixed mortgage rates have peaked; we may see a little shuffling around but the continued painful increases are over,” he said.

However, that does not mean that we are out of the woods just yet - monetary policy takes a long time to show up.  

Shaw said we could now start to see the faint glimmer of a light at the end of the tunnel.

Meanwhile, Jon Maloney, managing director of Century Business Finance, declared that the latest inflation data provided some much-needed, positive news for the industry.

“Hopefully, this will give the Bank of England the confidence to halt any further rate increases, which should in turn slowly begin to get things moving again, in what has become a very stagnant period for the economy,” he said.

While Maloney considered there was still a long way to go regarding the economic outlook, things now appeared to be moving in the right direction, he said.

Champagne on ice?

Rohit Kohli, director at The Mortgage Stop, said the latest inflation data showcased a greater fall than anticipated for the first time in a long time.

"However, it is not time to pop corks just yet; we need to keep a close eye on how this feeds into swap rates and the subsequent reactions from lenders,” Kohli said.

He believed this would be welcome news to the property market and businesses alike, but external factors, such as the ongoing conflict in Ukraine, could potentially reverse these drops, especially with food inflation remaining high.

“It will be intriguing to see whether a fall in swap rates will prompt lenders to reduce their product prices as swiftly and as frequently as they increased them,” he added.

John Choong, markets and equity analyst at Investing Reviews, said for the first time in months, CPI was coming in lower than expected at 7.9%.

“Core CPI also comes in a touch lower at 6.9%, which should allow lenders and borrowers alike to breathe a sigh of relief,” he reasoned.

That said, Choong believe ‘champagne bottles should not be popped just yet’ as the path to 2% remained a treacherous journey, with core CPI still high and sticky.

Choong said the easing figures should allow gilt yields to find some relief in the coming days, with markets now less likely to price in a 7% terminal rate from the Bank of England.

“We may now see mortgage rates start to come down as well; nonetheless, this will be dependent on whether the next few prints continue to show cooling inflation, especially on the core front,” he said.

With wage pressures also beginning to ease as well, Choong said there was now hope that both the housing market and the UK economy could achieve a 'soft landing' without entering a recession.

What is your view on the market outlook following the latest inflation data? Let us know in the comment section below.