ONS data reveals UK house price growth and inflation drop ahead of rates decision

The average UK house price saw a 1.1 percent rise in the year to April, picking up pace from a 0.9 percent annual growth in the 12 months to March, as per the Office for National Statistics (ONS).

This marked the second consecutive month of annual price increases, following eight months of yearly declines.

These figures were unveiled alongside data from the ONS that showed Consumer Prices Index (CPI) inflation decelerated to two percent in May, down from 2.3 percent in April.

Despite inflation returning to target, experts forecast that the Bank of England is likely to delay any interest rate cuts. The Bank's next decision on interest rates is due this Thursday.

The last time CPI was recorded at 2% was in July 2021, before it soared to a 40-year high of 11.1 percent in October 2022.

ONS data released on Wednesday revealed that house prices increased by 0.6 percent in England, 0.4 percent in Wales and by a significant 4.5 percent in Scotland in the 12 months to April.

In Northern Ireland, property values saw a 4.0 percent annual increase in the first quarter of the year.

Average UK private rents rose by 8.7 percent in the 12 months to May, the ONS reported, slowing from an 8.9 percent annual increase in April and below a record high annual rise of 9.2 percent in March.

In May, the average private rent in Britain stood at £1,262 per month, with the highest being in Kensington and Chelsea in London (£3,397), and the lowest in Dumfries and Galloway in Scotland (£480).

Matt Smith, a mortgage specialist at property website Rightmove, has said: "Hopefully today's inflation drop is the first step on the journey towards lower mortgage rates in the second half of the year."

"Market expectations are still that the first Bank of England rate cut is more likely to be later in the summer rather than tomorrow, but at least today's news will keep us on course rather than throwing a curveball."

David Hollingworth, Associate Director at L&C Mortgages, has remarked: "The fall in the rate of inflation to the Bank of England target rate of two percent is positive news."

"This moves a step closer to the point when the Bank of England could feel confident enough that inflation is coming under control, opening the door to a cut to base rate.

"Today's figures are in line with market expectation, and few are anticipating that the Bank will feel the timing is right for an interest rate cut when the MPC (Monetary Policy Committee) announces its decision tomorrow."

"Today's news is unlikely to cause a ripple as far as mortgage rates are concerned and looks unlikely to be enough to tee up any surprise move to base rate."

Mortgage borrowers eager for a reduction in interest rates might have to brace for a longer wait than initially anticipated this year.

Andrew Montlake, the managing director at Coreco mortgage brokers, expressed optimism: "After many long months there is finally something to cheer about as inflation has hit its long-term target of two percent, which will be a shot in the arm for the economy."

He also suggested that lower swap rates could lead to enticing summer deals from lenders: "Whilst we should see a resulting fall in swap rates which should give lenders room to release some 'summer sizzler' products with lower rates, one swallow does not make a summer."

Jonathan Hopper, CEO of Garrington Property Finders, reflected on the recent market trends: "Today's figures capture the afterglow of the surge in activity seen at the start of the year."

He noted the lag between initial agreements and completed sales: "Many of the sales completed in April stem from deals struck in January and February, when buyers were out in force and the market was on a roll."

Nicky Stevenson, managing director at Fine & Country, predicted an upturn in market activity: "As we expect the economic landscape to continue improving, it's likely that we will see a spike in activity as the year progresses, especially with an interest rate cut from the Bank of England on the horizon."

Jeremy Leaf, a north London estate agent, observed that the latest economic news had already been anticipated by the market: "Today's announcement of a fall in inflation growth and previous drops appear to have already been factored into the expectations of many home buyers."

"A cut in base rate had also been anticipated but now there is widespread acceptance that mortgage costs will stay higher for longer."

Jean Jameson, Chief Sales Officer at estate agent firm Foxtons, remarked: "The mortgage market seems to have settled and along with inflation levels coming down, there seems to be a new confidence in the sales market."

Nick Leeming, Chairman of estate agent company Jackson-Stops, commented: "Early indicators from the Jackson-Stops network suggest that the election has had little impact on buyer and vendor sentiment."

Iain McKenzie, CEO of the Guild of Property Professionals, stated: "The Guild remains cautiously optimistic about the outlook of the housing market for the remainder of the year. Strong buyer demand, alongside a slowdown in house price volatility, will help to keep the industry seeing robust growth."

Nathan Emerson, CEO of property professionals' association Propertymark, warned: "The impact of what has been a challenging economic period continues to play chaos for many renters."

He went on to say, "Not only are personal finances stretched to the max for many people, but we have the added uncertainty of a General Election and what that might ultimately mean for renters and landlords..." He concluded by observing: "Currently, demand is continuing to seriously outstrip supply, and this remains a major contributory factor to elevated rental prices across the board."

Mark Harris, the CEO of mortgage broker SPF Private Clients, pointed out: "There is a sense that some buyers and sellers are waiting for the first rate reduction before taking action, so a cut this summer could really give the housing market a boost."

He added optimistically: "Following a somewhat challenging first half of the year, there are hopes that a post-election bounce will lead to a more promising autumn for the housing market."