Today’s data from the Office for National Statistics (ONS) has revealed that April’s inflation rate stood at 2.3% – down from 3.2% in March.
This news follows the Bank of England’s decision to continue holding interest rates at 5.25%. As inflation continues to fall, pressure is mounting on the BoE to pursue cuts to interest rates as the UK economy maintains its course for recovery.
David Hannah, Chairman of the UK’s leading property tax experts, Cornerstone Tax, asserts that The Bank of England’s upcoming decision on interest rates on the 20th of June will be influenced by various factors, however, they must look to reducing interest rates at their next meeting in a bid to encourage prospective first-time buyers to take their first step on the housing ladder.
Since the BoE’s initial decision to pause interest rate hikes, the UK’s mortgage market initially showed considerable signs of recovery, however, the latest research from Rightmove has revealed that the average British house price reached a record high of £375,131 in May, reflecting a 0.8% monthly increase.
This surge, equivalent to a £2,807 rise, is driven by pent-up demand from buyers who had paused their plans last year sustained by high mortgage rates. These findings were released as tenants renewing an existing contract in Britain typically saw their rent rise by an average of 8.3% over the last 12 months, outpacing rental growth on newly let properties.
This news continues to destroy the morale of Generation Stuck – those Brits currently unable to buy a home and leave the rental market.
David Hannah, therefore, highlights that today’s announcement from the ONS must be the catalyst for the BoE’s Monetary Policy Committee to prioritise first-time buyers by further reducing interest rates to 4.75%. This move would allow for the UK’s housing market to recover faster whilst also delivering far greater opportunities for those looking to escape an overheated rental market.
Chairman of Cornerstone Tax, David Hannah, said, “April’s inflation figures and mortgage approvals should indicate an overall cooling off of the UK economy.
“If we are to climb out of our current recession this year, then it must be acknowledged by the BoE and to avoid a sudden crash of inflation, will hopefully increase pressure on the MPC to start reducing interest rates sooner rather than later.
“Economies have momentum, with the rate of inflation continuing its downward trajectory towards the BoE’s threshold of 2% – the MPC must start thinking about the optimum time to cut rates.
“I’d urge the MPC to seriously consider cutting the interest rate in their next meeting, even a reduction by a quarter percentage point would signal optimism within the UK economy, with a target base rate of 3-3.5% being the overall goal if the BoE want to truly prioritise prospective buyers in the new year.”
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