Inflation drops to 10.1% and average house price hits £294,000 — industry reacts

This marks a third consecutive monthly decline after October’s record level, which was the highest annual rate recorded in the National Statistic series’ 25-year history.

The CPI including owner occupiers’ housing costs (CPIH) also dropped to 8.8%, compared to 9.2% in December 2022.

According to the ONS, the largest downward contribution to the latest change in both the CPIH and CPI annual inflation rates came from transport, and restaurants and hotels.

However, the rising prices in alcoholic beverages and tobacco made the largest, partially offsetting, upward contribution to the change.

Meanwhile, the latest House Price Index data — released in tandem with the inflation figures — showed that UK average house prices rose by 9.8% in the year to December 2022.

Average house prices came in at £294,000 in December, marking a slight decrease from the previous month’s figure.

Industry experts react to latest ONS inflation and house price index figures

This section will be constantly updated throughout the day — check regularly for more comments from industry experts

3pm

Lewis Shaw, founder of Riverside Mortgages:

"It’s positive to see the inflation figures moving in the right direction, but there’s still a huge gulf between where inflation should be.

"This won’t stop the Bank of England from hiking the base rate again on 23rd March at the next MPC meeting. It seems the most likely hike now will be 25 basis points, and we have to hope most of this is already priced in.

"For mortgage borrowers, this means rates will stay broadly where they are for the rest of this year. In the past few days, we’ve seen swap rates nudge up, which is probably the nail in the coffin for any meaningful fixed rate reductions. This is the new normal and we all need to accept it."

1:30pm

Gareth Lewis, commercial director at MT Finance: 

"These end-of-year [house price] stats reflect completed transactions that were put into play a good few months before, so we are still not seeing the full mini-budget fallout and impact that will have had on buyers trying to push prices down.

"In order to return to the volume of transactions seen in 2018 and before, [we] will require some reform of stamp duty or similar to encourage people to buy, particularly when mortgages cost more. While there isn’t enough supply coming to the market, there won’t be enough transactions flowing through the system to generate the level of revenue the government will be looking for.

"We are likely to see more regionalised changes in prices this year. There were some over-inflated areas post-Covid, as people wanted to move out to the suburbs and further afield, pushing up values where demand was high. As more people return to more usual working environments, that will have an impact on values in those areas."

11:00 am

Samuel Mather-Holgate, managing director at Mather & Murray Financial: 

"Inflation coming down faster than expected means it’s slightly less likely the central bank will hike rates by 50 basis points next month, although that’s still the most accepted direction of travel. 

“Inflation should nosedive in a few months and even be back down to the 2% target by the end of the year, so bank rate cuts are coming. 

“The sensible thing for the Monetary Policy Committee to do now would be to pause and take a breath, and release the thumb screws that are inflicting so much pain on homeowners."

Mark Harris, chief executive at SPF Private Clients:

“Inflation dipping for the third month in a row will help ease some pressure on the Bank of England, but a quarter-point increase in base rate next month is most likely still on the cards.

“Back in December, both swaps and fixed-rate mortgages were rather higher than they now, as a result of the fallout of the mini-budget. Much of that turmoil has passed through the system, with five-year fixes dropping below 4%, as servicing pressures subside and lenders remain keen to generate new business. 

“Those buyers who have been sitting on their hands may be encouraged to take the plunge now fixes are looking increasingly palatable.”

Douglas Grant, CEO at Manx Financial Group:

“This is, of course, positive news, but businesses will not be jumping for joy just yet, having already faced a stormy and turbulent economic environment. 

“Double digit inflation, an ongoing energy crisis as well as high interest rates together mean that demand for liquidity support in the UK is going to remain at record levels as firms desperately seek vital capital. 

"While many SMEs prepared for the worst by locking their debt into fixed-rate structures, it is now too late for other businesses which were not so forward-thinking. Hence, more should be done at governmental level to help SMEs, the backbone of the UK economy. 

“SMEs continue to struggle with accessing finance and this lack of availability is costing them and the UK economy growth opportunities at a time when it is needed the most. The amount of growth that is being sacrificed is significant and will require new solutions which are designed to address this funding gap. 

"For some time, we have been calling for a sector focused permanent government-backed loan scheme which brings together both traditional and alternative lenders to guarantee the future of our SMEs. 

“As the government looks for other ways to power the economy’s resurgence, the importance of a permanent scheme should not be understated, it could act as the fundamental difference between make or break for many companies, and in turn, our economy. We very much hope this is something that becomes a reality." 

Vikki Jefferies, proposition director at PRIMIS Mortgage Network: 

“Despite house prices declining from the record highs seen in 2022, the figures today should provide buyers with some confidence in that they remain well above pre-pandemic levels. Furthermore, demand should continue to outstrip supply in the coming years, making any drastic fall in prices less likely.   

“However, brokers must recognise that inflation continues to present many consumers with significant day-to-day financial challenges, and it is essential to understand the individual needs of every client to find the most suitable product for them during this period. 

“This means investing appropriate resources into KYC, fact-finding and CRM systems to ensure brokers are working with their customers every step of the way.”