Inflation drops to 6.4% — industry reacts

On a monthly basis, CPI fell by 0.4% in July 2023 compared with a rise of 0.6% in July 2022.

The CPI including owner occupiers' housing costs (CPIH) rose to 6.4% compared to 7.3% in June.

According to ONS data, falling gas and electricity prices provided the largest downward contribution to the monthly change in CPIH and CPI annual rates.

Food prices rose in July 2023 but by less than in July 2022, also leading to an easing in the rates.

Meanwhile, the latest House Price Index (HPI) data — released in tandem with the inflation figures — showed that UK average house prices rose by 1.7% in the year to June 2023.

Average house prices came in at £288,000 in June, which is £5,000 higher than a year ago, but £5,000 below the recent peak in November 2022.

Industry experts react to latest ONS inflation and HPI figures

 

Paresh Raja, CEO at MFS:

"Another step in the right direction, with today's CPI drop following on from the smaller-than-expected base rate hike at the start of the month.

“But it might be a case of two steps forward, one step back; all the talk this week has been that we are in for a shock rise in inflation when next month's data comes out on 20th September — given the Bank of England's next interest rate decision follows the next day (21st September) that will likely prove a hugely important 48 hours.

"For now, we should allow some positivity to permeate back into the property and lending markets, but lenders must double down on a proactive approach to supporting brokers and borrowers who will be feeling the effects of high inflation and consistent base rate hikes.

“In turn, lenders can help the market return to a more buoyant state."

Jatin Ondhia, CEO at Shojin:

“It’s good news today but there are strong rumours that next month’s data will show a rise in inflation once again.

“Inflation remains too high, and if indeed it does start to rise again in the final months of the year, we have to expect the BoE to come hard with more interest rate hikes.

“As borrowing becomes more expensive, this will inevitably further impact house prices and property development.

“For investors it is crucial they assess how well-positioned their portfolios are to deliver returns amid stickier-than-expected inflation.

“Diversification will likely remain a watchword for investors and predicting quite where interest rates and inflation will go in the months to come is difficult.

“Many people will opt to diversify their investments so they are not tied too closely to any particularly market forecasts.”

Craig Fish, director at Lodestone Mortgages & Protection:

“This news will hopefully act like a calming pill for mortgage lenders, but core inflation remains sticky and as a result, I expect the BoE to increase rates at their next meeting and for lenders to now hold steady.

“I strongly suspect that Rishi Sunak and Jeremy Hunt will be claiming that 'their plan' is working and hoping it bodes well at the next general election.”

Sam Norris, MD at Grand Union Finance:

“As much as the figures are obviously positive, I can’t see the BoE slowing down their plans to keep this downward trend but continuing the raise the base rate.

“5.75% by the end of this year is still highly likely, and this is looking like it will create a new ‘temporary normal’ in the mortgage world, which will not be good news for vendors and estate agents as this should keep demand for property low, and lead to a reduction in prices.

“However, we do look like we are on track for that sub-5% inflation figure by the end of the year that Rishi Sunak pledged, so I would like to think if this is achieved, base rate reductions could follow in Q2 2024.”