The UK Consumer Price Index (CPI) inflation fell to 2.3% in April 2024, down from 3.2% in March, reaching its lowest level since July 2021. This drop, though less than the predicted 2.1%, is primarily due to significant reductions in energy costs, with electricity and gas prices falling by 27%.
Despite this decrease, inflation remains above the Bank of England's target of 2%, reducing the likelihood of an imminent interest rate cut. Current market sentiment shows only a 13% chance of a rate cut in June, with higher probabilities pushed to later months.
The Bank of England's base rate stands at 5.25%, significantly affecting mortgage costs. About 1.6 million mortgage borrowers are transitioning from low fixed rates this year, facing higher average mortgage rates now at around 5.5% for five-year fixes.
The Office for National Statistics also reported an annual house price increase of 1.8% to £283,000 in March 2024, the first rise since June last year, with notable regional variations. Private rents continued to rise, though at a slightly reduced rate of 8.9% annually.
Economists like Yael Selfin from KPMG UK note that while inflation is nearing the target, its current level and persistent factors such as core inflation and strong wage growth may delay rate cuts.