Inflation jumps to 3.5% as a rate rise looms: this week’s property news
UK inflation rose to 3.5% in September, up from 3.1%, making a Bank of England rate rise on 5 November more likely. Mortgage rates are already close to 6%, and the average deal now lasts just 13 days before it is changed or withdrawn.
Rents are still climbing, up 3.8% in a year, while house prices are broadly flat. All eyes now turn to Wednesday’s Budget, where the Chancellor is expected to set out reforms to the homebuying process.
Inflation rises to 3.5%
The Office for National Statistics said on 21 October that CPI inflation reached 3.5% in the year to September. That is up from 3.1% in August. Core inflation rose from 2.6% to 2.8%.
Motor fuel did most of the damage. Prices were up 29.8% on a year earlier, with diesel averaging 192.5p a litre. Housing and household services rose 5.3%, up from 4.9%.
Bank Rate is 3.75%. The Bank held it there on 17 September by a 6-3 vote and warned that rates may need to rise if energy prices stay high. In a Reuters poll reported by the HomeOwners Alliance, 54 of 63 economists expected a rise to 4% on 5 November. That poll was taken before this week’s inflation figure.
Mortgage rates close to 6%
Moneyfacts put the average two-year fix at 5.93% at the start of October. A month earlier it was 5.59%, and a year ago 4.98%. The average five-year fix was 5.95%.
Rates kept edging up. By 15 October, Moneyfacts’ daily figures showed the two-year fix at 5.96% and the five-year at 5.99%, according to The Intermediary.
Deals are also disappearing quickly. The average product lasted 13 days before being repriced or withdrawn, against 43 days in 2019. Moneyfacts links this to swap rate swings driven by the Middle East conflict.
The cost is showing up in demand. Rightmove said on 19 October that buyers contacting agents were 9% down on a year ago. Sales were 8% lower, while new listings were up 3%.
Rents still rising, prices flat
The ONS put the average UK private rent at £1,406 a month in September. That is 3.8% higher than a year earlier, the same pace as in August.
In England the average was £1,466, up 4.0%. The North West saw the fastest growth at 5.7%. London and the South East were slowest at 3.5%. In Scotland, rents rose just 0.7%, the lowest annual rise in the series.
The same release showed the average UK house price at £273,000 in August, up 0.9% on a year earlier. London prices were 2.2% lower than a year ago.
Budget on Wednesday
Chancellor John Healey delivers the Budget on 28 October. The Prime Minister ruled out changes to stamp duty at this Budget in July, as tracked by Calculate My Stamp Duty. The Your First Home equity loan for first-time buyers of new-build homes in England is due to be confirmed.
Ahead of the Budget, the government said it plans to cut £116 million a year of costs from buying and selling homes, PropertyWire reported. Proposals include upfront property information when a home is listed and binding conditional contracts early in the process. Full details are due on Wednesday.
Stamp duty receipts fell too. HMRC figures released on 21 October showed £1,302 million collected in September, down 10.5% on a year earlier.
Coming up
The Budget lands on Wednesday 28 October. The next Bank of England rate decision follows on Thursday 5 November.
What it means for you
Buying? With fewer buyers about, there is room to negotiate. Rates are moving fast, so get an agreement in principle and be ready to secure a deal quickly.
Selling? Buyer numbers are down and listings are up. Pricing in line with the local market matters more than ever.
Renting? Rents are still rising faster than house prices, especially in the North West. Budget for increases at renewal.
Letting? Rents rose 3.8% in a year, but higher mortgage rates will squeeze margins for anyone refinancing. Remember that “Register your rental property” opens on 15 December, starting in the West Midlands, at £65 per property per year.
This is general information, not financial or tax advice.
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