UK Inflation falls. Market impact

In response to the most recent inflation figures, Head of Business David Wise provides an insightful perspective: “Finally, inflation is moving in the right direction. The focus is firmly on August inflation figures to see if this is gaining momentum”

In the past few weeks swap rates have demonstrated relative stability, leading to a decrease in the withdrawal of products by lenders. It appears the market is paying keen attention to the new inflation figures to guide future actions and to gauge if recent market fluctuations have finally abated.

In a positive response last week, the markets saw five-year swap rates dip to 4.75 per cent, down from 4.88 per cent just a few days ago. If swap rates persist in this downward trend and if market volatility subsides, we might observe certain lenders commencing a reduction in their pricing.

Given the current circumstances, a compelling case can be made for the Bank of England to temporarily hold off further interest rate hikes. This would allow the market ample time to find its equilibrium and adapt to recent changes. The succession of base rate increases has undoubtedly inflicted discomfort; it would be prudent to allow their impact to fully permeate the market, as opposed to perpetuating anxiety and hardship among borrowers.