Inflation figures could hurry along rate cuts

18-Dec-2007

New buyers looking for the best first mortgage in the new year could benefit from lower interest rates following the publication of better-than-expected inflation figures, analysts have speculated.

The Office of National Statistics (ONS) has said that inflation remained at 2.1 per cent for the second consecutive month in October, below expectations of a rise to 2.2 per cent.

"The November inflation data brought some welcome festive cheer for the Bank of England […] it is highly possible that interest rates could move below five per cent in the second half of 2008," said Howard Archer from Global Insight.

However, the retail price inflation figure, which includes mortgage costs, did creep up from 4.2 per cent to 4.3 per cent over the same period, suggesting that first time buyers do not have it all their own way just yet.

Furthermore, research from Alliance Trust has suggested that parental help may be required for many new buyers looking to purchase their first home.

"Our study shows the extent to which the impact of inflation can differ from what the government’s headline figure suggests, with big variations across different age groups," said Shona Dobbie, head of the Alliance Trust Research Centre.

"We are […] concerned about the more recent increase in the rate of inflation facing young adults, largely due to higher rents and education costs, as well as the costs of basic goods," Ms Dobbie added.

Mortgage rates fall following Bank cutMore graduates turning to friends and family

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