The latest report on inflation was released today by the Office for National Statistics (ONS) showing the efforts of the Bank of England’s Monetary Policy Committee (MPC) is paying off. Inflation fell to 6.8% in July, which was in line with the forecast given and this could bring about some good news for borrowers. Reaching the forecasted level for inflation could take some pressure off the MPC and should amount to the next rate hike only being 0.25% in September, while had it stayed above forecast, a larger rate increase could have occurred such as the 0.50% voted on in June. 

The decline of inflation in July to 6.8% from the reported 7.9% in June is a strong drop. It should bring some optimism to the economy, one part being the lending market. The ease in the cost of living could cause lenders to feel there is less risk in lending to borrowers and current rates should remain available. When the last inflation report was released, which was less of a decline than expected, lenders quickly responded with increases in interest rate offers.

The decline in inflation will not offer relief from rising interest rates. The target inflation rate set by the Bank is 2.0%, which means the current rate of inflation is more than three times the target rate. More rate hikes are expected, with the next possible increase happening when the MPC meets on 21 September. It would mark the fifteenth consecutive MPC meeting resulting in an increase in the Bank’s standard base interest rate.

The ONS did note in their response to the inflation decline that the main reason was due to lower cost in gas and electricity versus the same time last year. 

Matthew Corder, ONS deputy director of prices, remarked, “Inflation slowed markedly for the second consecutive month, driven by falls in the price of gas and electricity as the reduction in the energy price cap came into effect. Although remaining high, food price inflation has also eased again, particularly for milk, bread, and cereal.”

Looking at core inflation, which deducts items that are considered volatile such as fuel and food, it remained unchanged at the same 6.9% reported last month.

For borrowers hoping to have hints of possible rate freezes or cuts, it is not likely with inflation three times above target as stated earlier. Therefore, for those that could benefit from building a strategy to save money while borrowing becomes more expensive, it would be smart to start planning sooner rather than later.

Homeowners are encouraged to consider a remortgage. It is a smart choice when rates are rising or falling, as it allows the homeowner to adjust to a loan type and interest rate that is beneficial to their needs. When rates are increasing, choosing a fixed rate remortgage locks in the rate and shields the homeowner from further rate hikes.

For homeowners coming to the end of their current mortgage term, choosing a remortgage over allowing the lender to move them to their standard variable rate (SVR) could save a substantial amount of money. A SVR could be double or more the rate that found with a remortgage. Also, the SVR will reflect any further rate hikes due to the loan type being variable.

Discovering what savings are available is quick and easy by shopping with a remortgage broker online. A broker works with many lenders, so within a few minutes a homeowner could have numerous quotes from a variety of lenders in hand to review and compare. The broker could also have an exclusive deal not offered by a lender directly to borrowers. Homeowners also have the option of shopping for quotes by going from website to website of lenders.

It is hopeful that inflation is moving downward, but interest rates will continue to move in the opposite direction and climb for months to come. Inflation is not expected to near target until early 2025. The rate hikes may become less often versus occurring at each MPC meeting, but rate increases will continue. Homeowners should consider the warnings of experts to do all they can to save money and a remortgage could be the best way to do so.