Interest rates are likely to be cut again as inflation falls below 2%

The UK’s inflation rate has fallen unexpectedly to 1.7% this month. This follows two years of uncertainty and is in contrast to the 11.1% seen in October 2022, the highest inflation has been for more than 40 years.

Now, with the rate below the national target of 2% for the first time in three years, we can look ahead with more confidence and forecast a stronger economic future.

The most important effect is that the Bank of England is now very likely to cut the base rate of interest at the next meeting of its Monetary Policy Committee in November.

Speculation had already suggested that a further cut would be made following a reduction in August and a hold in September.  

The overall improving economic picture in the UK had already given confidence that the worst times were over and the country was now firmly on the path to recovery, prompting calls for further rate cuts.

However, no one expected such a sharp drop in the rate of inflation, and it is now fair to say that another interest rate cut to 4.75% is all but certain as a result.

Talking to the BBC, Danni Hewson, head of financial analysis at AJ Bell, said a 0.25 percentage point cut was "pretty much nailed on" for November and expectations of a second cut in December had "jumped up".

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How will falling inflation affect the UK property market?

The August cut to 5% gave the property market an immediate boost following the first six months of the year when the market had already begun turning around.

Not only did house prices in the UK hit a two-year high, but they also began growing at their fastest rate since 2022.

Mortgage providers moved ahead of that previous cut and began offering rates below 4% for the first time since before the COVID-19 pandemic.

Market activity also picked up as a result. More buyers entered the market as borrowing became more affordable, and new listings reached a seven-year high as confidence flooded back into the market.

A new rate cut will likely have a similar effect. High street lenders should start reducing rates even further with the prospect of more interest rate cuts in November and December.

Lower costs will encourage more people to move, increasing competition for homes and pushing up house prices across the UK. What’s more, this is all happening ahead of the busy period in the new year which normally sees a higher number of people looking to buy homes.

UK property is already a better investment than stocks and shares, and the latest interest rate cut is likely to make that even clearer.

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How can investors make the most of lower interest rates?

For investors, this is the ideal time to secure an off-plan property, whether you are doing so as an individual or as a limited company.

By purchasing off-plan property in a busy location like Manchester city centre, you can secure today’s below-market price ahead of the forecast house price rises.

When the property is completed, it will be valued at the higher future market price and you will earn instant capital appreciation.

If you use a mortgage, you can also benefit at the other end of the transaction. When you buy off-plan, you pay the balance on completion, meaning that you could benefit from lower mortgage rates in the future if they fall as expected in the coming months and years.

Want to buy UK property and take advantage of the lower interest rates that are coming soon? See our available investment opportunities and get in touch with the team today.