Inflation Falls to 2% Target: What Does This Mean for Mortgage Interest Rates?

After reaching a peak of 11.1% in October 2022, inflation has finally fallen to the Bank of England’s target of 2%. But what does this mean for mortgage interest rates ahead of the next Bank of England meeting?

Inflation rates have been on a downward trend

Mortgage costs have increased significantly over the last few years, and millions of homeowners are hoping that a cut in interest rates could be on the cards soon. The Bank of England has kept the base rate paused for its past five Monetary Policy Committee (MPC) meetings, and it’s unclear whether this trend will continue.

The Bank of England’s plan to increase borrowing costs and bring inflation down has worked, but it’s unclear whether this is enough to sway the Bank of England to finally cut rates. Bank of England Governor Andrew Bailey has stated that the base rate won’t be cut until the MPC is sure inflation will remain under control.

Bank of England Governor Andrew Bailey

Economists and financial analysts are still convinced that a rate cut could come in August, but the Bank of England needs to be sure inflation will stay down. Core inflation remains stubbornly high at 3.5%, and wage inflation is also a concern for the Bank of England.

Core inflation remains high

Mortgage rates also remain unchanged today, with the average two-year fixed residential mortgage rate at 5.97%, and the average five-year fix at 5.54%. There are currently 6,673 residential mortgage products available.

Mortgage rates remain unchanged

In conclusion, while the fall in inflation to the 2% target is a positive sign, it’s unclear whether this will be enough to sway the Bank of England to cut interest rates. Homeowners will have to wait and see what the next Bank of England meeting brings.

The Bank of England’s next move is uncertain