UK inflation dipped to 2.3 per cent in April, marking its lowest level in nearly three years. Financial experts suggest that now is a good time to evaluate your financial options, whether you’re saving or borrowing.
The fall, from 3.2 percent in March, was largely driven by a 12 percent reduction in the energy price cap in April. Although the decrease in inflation is positive news and closer to the Bank of England’s (BoE) two percent target, it is higher than expected alongside services inflation, reducing the likelihood of a base rate cut in June.
“Within minutes of the official inflation numbers hitting our screens, market expectations that the Monetary Policy Committee (MPC) could shift the base rate down next month plummeted from 50/50 to just over 10 percent,” stated Danni Hewson, head of financial analysis at AJ Bell.
Given the changes in inflation, it’s wise to seek financial advice if you’re planning for retirement, buying a home, remortgaging, or investing, to make the most of your money. Experts at Unbiased have shared what falling inflation rates mean for everyone, reports the Express.
What lower inflation means for savers
The drop in inflation signifies that prices are rising more slowly rather than falling. While this isn’t exactly what consumers are hoping for, it’s still welcome news.
With the current inflation rate at 2.3 percent and top savings rates hovering around five percent, savers can still outpace inflation by opting for a fixed-rate savings account, ensuring their money doesn’t lose value in real terms.
However, as base rate cuts become more probable, savings rates are likely to fall. Despite the delay in the likelihood of a base rate cut, it’s advisable to shop around for a fixed-rate deal now to benefit from higher rates for a longer period.
What the inflation rate means for homeowners
For homeowners, this year has been challenging with mortgage rates fluctuating unpredictably, rising and falling without much notice. Mortgage rates initially dropped at the end of 2023 but recently increased again following a higher than expected rise in US inflation, causing uncertainty about when the BoE will cut the base rate.
Mortgage lenders were recently reducing their rates in anticipation of the BoE cutting the base rate in June, prior to today’s inflation data. There’s a possibility that mortgage rate cuts will slow down (or rates could increase) now that the base rate cut is expected later than June.
What the inflation rate means for annuity
For those retired or nearing retirement and considering an annuity, it’s important to consider the potential impact of a future base rate cut on annuity rates.
Over the past two years, annuity rates have surged by 24 percent, driven by base rate increases. Therefore, any future cuts could affect your rate and the fixed income you receive.
Since 2009, Unbiased.co.uk has been a beacon for over 10 million people in need of sound advice. The platform connects users with fully regulated financial consultants, mortgage brokers or accountants from a pool of over 27,000 independent advisors.
All experts listed on Unbiased are regulated by the relevant official bodies, suitably qualified, and independent of product providers. Plus, your first meeting with an advisor won’t cost you a penny.
Unbiased has teamed up with Samaritans to back their crucial, round-the-clock emotional support service. Financial concerns are often cited by those reaching out to Samaritans, and Unbiased is committed to helping the charity can continue its vital work.
For every enquiry submitted and successfully matched to an adviser, Unbiased donates 30p to Samaritans, with a goal of raising £25,000.
For additional financial guidance, Citizens Advice and Money Helper are also available.
