Inflation falls - but what does it mean for the housing market?

Inflation falls - but what does it mean for the housing market?

As we pass November’s half-way point, the economic picture looks to be showing significant signs of improvement, with the annual rate of inflation dropping more quickly than expected to 4.6% (0.2% more than the Bank of England originally forecast.)

This surprising yet welcome announcement by the CPI, which arrived yesterday, is evidence that the Government’s target to halve inflation (from last year’s 11.1%) might not have been so ambitious after all.

The drop comes, in part, due to now-lower energy and food prices, and Analysts are quite understandably buoyed by this latest data, and what it might mean for the housing market, going forward.

Among the predictions, are improved competitiveness among mortgage lenders  - something that is already beginning to translate into more sub-5% deals, and slightly relaxed affordability rules. 

Coupled with the positive wage data of late, this shift will no doubt help to improve buyer powering in the year ahead, with new homeowners and those with existing mortgages most likely to benefit from falling rates.

Admittedly, those looking to re-mortgage might have to wait a little longer for these benefits to filter through, but housing market commentators are confident – in light of the positive noises being made about inflation – that these products will gradaully follow suit, and become more competitive in the mid- to latter- part of next year.


While it is safe to say that the once-bleak inflationary picture is (finally) beginning to look up, analysts are not entirely convinced that the cost of living crisis is officially over… yet.

On the one hand, energy prices this winter are likely to be less than last, but with the government support for bills no longer in place, many households will be unlikely to feel any significant benefit from this reduction.

Equally, the legacy of higher prices left by recent rate hikes is likely to persist for some time yet, making a ‘bounce back’ not quite so likely as a slow, steady return to synergy between the financial and property markets, in the years to come.