Inflation figures provide hope for first time buyers

14-Aug-2007

The Office of National Statistics has said that inflation fell to 1.9 per cent in July in a move that has surprised analysts and led many to reconsider their interest rate forecasts.

The new figure is down from June's rate of 2.4 per cent and comes in below the Bank of England's two per cent target for the first time since March 2006.

Furthermore, inflation has now fallen by 1.2 per cent since January alone, suggesting that the Monetary Policy Committee's (MPC's) series of interest rate rises may have had the desired effect.

"Although the MPC focus on future inflation rather than today’s rate, the fact that CPI [the Consumer Price Index] has come in well below their expectations must put some question mark over a move to six per cent interest rates," commented Ian Kernohan of Royal London Asset Management.

Any prolonged freeze in rates would spell good news for first time buyers, whose eagerness to get onto the property ladder has been made more difficult, but by no means quenched, by higher borrowing costs.

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