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Annual inflation fell to 2% in May, finally reaching the Bank of England’s long-term target.
This is down from 2.3% in April, and the decline was mainly due to falling food prices.
Core inflation, which excludes volatile energy, food, alcohol and tobacco prices, is still at 3.5% but down from 3.9% in April.
Despite this positive outlook, the Bank of England is expected to keep its base rate unchanged at 5.25% tomorrow.
Ben Thompson, deputy chief executive of the Mortgage Advice Bureau, said: “In other circumstances, the fall in inflation in May might have prompted some positive movement in the mortgage market. But with rate cuts largely priced in, the Fed slow to act and a general election just days away, the Bank of England will be reluctant to rock the boat.”
“This doesn’t mean it’s time to sit back and relax for potential property buyers or those with mortgage contracts expiring. Mortgage rates are unlikely to fall significantly even with the Bank of England cutting interest rates, so now is the time to get ahead, speak to your broker and get your mortgage in order. There are competitive deals on the market to take advantage of.”
Lettings and property brokerage group Propertymark wants banks to cut base rates to stimulate growth.
“With inflation now back at our original targeted levels, Propertymark is very hopeful that this will prompt a reduction in interest rates when the Bank of England’s Monetary Policy Committee meets tomorrow,” the company’s chief executive Nathan Emerson said.
“There have been multiple indications since the beginning of the year that interest rates may be cut mid-year, and now we want to see it all work out.