February’s inflation reading of 3% was unchanged from the prior month, but market sentiment emphasised caution, with John Phillips, CEO of Just Mortgages and Spicerhaart, calling February’s reading “the calm before the storm”.
The latest figures show that the Consumer Prices Index (CPI) was up by 3.3% in the 12 months to March, a rise from 3% in February. Meanwhile, the CPI including owner-occupiers’ housing costs (CPIH) was up by 3.4% in the 12 months to March, an increase from February’s 3.2%.
From a monthly perspective, CPI was up by 0.7% compared to an increase of 0.3% in March last year.
The ONS noted that motor fuels made the largest upwards contribution to the month-on-month change in the annual rates for both CPI and CPIH.
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‘A tale of two halves’
March’s figures come amid ongoing market unrest due to the conflict in the Middle East. Lenders have been changing and withdrawing rates frequently, although research from Moneyfacts earlier this month suggested that mortgage rates may have reached their peak.
However, earlier in April, the International Monetary Fund (IMF) predicted that inflation would rise to 4% – double the 2% target – due to the conflict. Market expectations are now that the Bank of England will lower interest rates at a much slower pace than prior to the outbreak of the war, which would have a knock-on effect on mortgage rates.
Ben Thompson, director of home moving strategy at Mortgage Advice Bureau (MAB), said: “Inflation ticking up reinforces the likelihood that interest rates will stay higher for longer – but the impact on borrowers won’t be universal.
“For those remortgaging, it’s a tale of two halves. Homeowners coming off ultra-low fixed rates will see a more noticeable jump in repayments, while those exiting more recent deals may find the change far less significant.
“Affordability remains a key consideration for aspiring buyers. Our research shows that 52% say they’re ready to buy this year, while 41% are still waiting for a ‘sign’ to make their move – often due to concerns around house prices (45%), deposits (44%), or not fully understanding the process (31%).”
Thompson continued: “The market, however, is evolving. Lending is becoming more flexible, with more options available, meaning many buyers may be closer to purchasing than they think.
“For those planning a move later this year, today’s figure underlines the need to keep expectations realistic. A sharp drop in mortgage rates still looks unlikely in the near term, so planning around current affordability levels – and seeking expert advice from a broker – remains key to moving forward with confidence.”
