The chancellor’s aim to stick to plans to reduce the budget deficit in the Spring Statement were well received by debt markets.
Following the speech, the yield on a 10-year government bond or Gilt has fallen below 1.5% – from highs of 1.65% in February, according to investment platform AJ Bell.
Inflation forecasts for the next couple of years by the Office for Budget Responsibility were also revealed in the Spring Statement.
Russ Mould, AJ Bell investment director, said: “All of this helps anyone with a mortgage, at least indirectly, so neither the chancellor’s long-term debt-reduction policy nor his statement today should be taken lightly.
“The healthier the nation’s finances are, the more cheaply the government can borrow, as lenders will be more confident of ultimately getting their money back – and the interest rate at which the government can borrow forms the base of the calculation that sets the cost of mortgages.
“Anyone with a home loan may therefore get some knock-on benefits from today’s statement – providing the OBR is correct in its assessment of inflation and an unexpected economic downturn does not blow the budget deficit reduction forecasts off course.”
Inflation fall set to help borrowers
The downgrade in inflation could put the Bank of England under less pressure to raise interest rates.
And a lower cost of living also means that real wage growth will turn positive for consumers next year, according to the chancellor.
John Philips, group operations director at Just Mortgages and Spicerhaart said: “The chancellor also announced that inflation is predicted to return to its 2% target over the next 12 months, which suggests that the speculation over further rate rises may be just that.
“The reason for the recent rise was to curb inflation, but if it is due to fall back naturally over the coming months, these rate rises may not happen, meaning borrowing conditions will remain favourably low.”
