Inflation hits 9% and average house prices rise by 9.8% — industry reacts

The Office for National Statistics (ONS) has revealed that the Consumer Prices Index (CPI) rose to 9% in the 12 months to April 2022, up from 7% in March.

This is the highest recorded CPI 12-month inflation rate in the constructed historical series, which began in January 1989.

The latest data also shows that the Consumer Prices Index including owner occupiers' housing costs (CPIH) reached 7.8% in the 12 months to April 2022, (up from 6.2% in March) — the highest recorded 12-month inflation rate in the National Statistics series, started in January 2006.

The largest upward contributions to the annual CPIH inflation rate in April came from housing and household services (2.76 percentage points, principally from electricity, gas and other fuels, and owner occupiers' housing costs) and transport (1.47 percentage points, principally from motor fuels and second-hand cars).

The ONS has also published today (18th May) the latest House Price Index, which revealed that average house prices in the UK rose by 9.8% in the year to March 2022, down from 11.3% in the year to February 2022.

The average UK house price was £278,000 in March 2022, £24,000 higher than this time last year.

Industry experts react to latest ONS inflation and HPI figures

James Bloom, director at Alternative Bridging Corporation:

“High inflation is a double blow for property investors; the natural response from the Bank of England will be to raise interest rates, increasing the cost of borrowing. 

“At the same time, the spiralling cost of building materials compounds the impact on their finances. 

“It's more important than ever to work with a competitive lender that offers flexibility and cashflow solutions to put investors in greater control of their finances and help them navigate this difficult time.”

Simon Webb, MD of capital markets and finance at LiveMore:

“The latest rise in inflation to 9% will increase the chance of the Bank of England’s Monetary Policy Committee lifting the base rate in June, potentially by as much as 0.5% — that will be a real blow for mortgage borrowers on variable rates, whose monthly payments have potentially already gone up four times in five months.

“Now is the perfect time for borrowers to lock into a long-term fixed rate mortgage, and this will be especially advantageous for borrowers aged 50 to 90+, as many of the upper part of that age group are unlikely to want to move home again, so knowing exactly what their monthly payments are will give them peace of mind. 

“As they move into their twilight years they won’t have to worry during these uncertain times if the Bank continues to raise the base rate.”

Douglas Grant, group CEO at Manx Financial Group:

“Today’s announcement should come as a major wakeup call to the just how significant the rise in inflation will be, but also just how difficult the remaining half of the year is going to be. 

“We believe that demand for working capital, which has already reached unprecedented levels, will soar even further, as more businesses desperately require liquidity provisions to counteract rising interest rates, supply chain issues, increases in wages and additional pandemic-induced headwinds. 

“With the cost of borrowing set to increase, many SMEs are struggling and will continue to be challenged this year.

“Having successfully deployed multiple relief schemes — BBLS, CBILS and RLS — for SMEs throughout the pandemic, the UK government should, in our opinion, now turn their attention towards a permanent loan scheme to help leverage businesses going forward. 

“As the government looks for ways to power the economy’s resurgence, the importance of a permanent scheme cannot be understated — it could act as the fundamental difference between make or break for many companies, and in turn, our economy.

“Now is a vital time for the government to work together with traditional and alternative lenders to guarantee the future of our SMEs and to ensure the successes of these emergency schemes are not wasted.

“SMEs would be well-advised to take stock of their current capital structure and if appropriate, access fixed term, fixed rate loans to prevent additional exposure to an increasingly volatile lending market.”

Gareth Lewis, commercial director of property lender MT Finance:

"The gap between supply and demand continues to push average property prices higher, although the pace of annual and month-on-month growth is slowing; this is no surprise, as the cost of living also continues to rise, with buyers having to find more money to purchase their dream home, while at the same time paying more for everything else.

"Continuing rising property prices don’t really help anyone — they may make homeowners feel richer, but if you are trying to buy a home, the task becomes even more challenging.

"Those trying to move up the ladder are finding it harder, as the trading gap grows wider and the home they are moving to becomes relatively more expensive — first-time buyers are finding it even more difficult, with even more money required for a deposit.

"Some reform to stamp duty, perhaps removing the need for downsizers to pay it, needs to be considered to stimulate the market and increase supply, which will help keep prices in check."

Jeremy Leaf, north London estate agent and a former RICS residential chairman:

"The figures interestingly highlight the beginning of the change in the supply/demand balance.  

"Rising interest rates and inflation contributing to a drop in real incomes is resulting in a reduction in quantity, if not quality, of enquiries. 

"We don’t expect property prices to fall noticeably anytime soon while the huge shortage of stock in some price ranges and locations remains, particularly as so many are still on fixed-rate mortgages or do not need to arrange finance."

Mark Harris, chief executive at SPF Private Clients:

"Inflation hitting 9% and cost of living increases, alongside rising base and mortgage rates are causing concern around affordability and borrowing potential, as well as the potential knock-on effect to house prices.

"Lenders remain keen to lend with a number making tweaks to criteria to enable this to happen, while still ensuring they are lending in a responsible way.

"Mortgage rates remain competitive, although they are on the rise; borrowers need to move quickly to secure the best rates as they are often pulled at short notice."

Melanie Spencer, head of payment and mortgage services at Finova:

“A lack of sufficient housing supply has continued to drive up property prices in March, but in the coming months we can expect homebuying activity in the market to slow, as surging inflation and the ongoing cost of living crisis continue to dent people’s savings and leave their finances stretched. 
“Following a record-breaking two years, brokers will now be feeling challenged in new areas as they support clients facing financial difficulty.

"For first-time buyers and movers attempting to navigate the property ladder, rising bills paired with higher interest rates may set back their housing plans, while others will need support with remortgaging. 
“During what will still be a busy time, mortgage clubs will be on hand to support stretched brokers with market-leading technology designed to automate tasks; this will help them keep on top of their workloads and give them more time to support their clients who are in need.”



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