Borrowers got a surprise boost as inflation fell more than expected last month, dropping to 2.8% from 3% in January.
The dip beat City predictions of 2.9% and matched the Bank of England’s forecast. But don’t crack open the bubbly just yet – experts warn price pressures could push inflation up again, possibly peaking at 3.7% later this year, driven by rising energy and utility bills.
David Hollingworth, associate director at L&C Mortgages said: “The attention will be on the Chancellor’s Spring statement later today. With cuts to spending widely anticipated, the surprise easing in the rate inflation in February will be welcome news.
“Although a slight reduction in the rate of inflation had been expected, today’s figures have outstripped expectation. That can have positive implications for mortgage rates if it helps to boost the market’s outlook for interest rate movements.
“Today’s news may not do enough to materially shift the forecasting though and although this should undoubtedly be seen as good news, it’s widely anticipated that the rate of inflation will lift again in coming months.
“The rate is still appreciably higher than the Bank of England’s target rate.”
“The rate is still appreciably higher than the Bank of England’s target rate. With further rises to come, the message for interest rates is likely to remain one of rate cuts being on the cards but feeding through gradually.
“Mortgage rates have been much more stable recently, with most lenders making small improvements when they can. Although today’s figures are positive, I don’t expect to see a significant change to that pattern. Similarly, we’ll hope that markets will give a calm reception to any inflation increases in the months to come.”
JUST A BLIP
John Phillips, chief executive of Just Mortgages and Spicerhaart, said: “Some good news on inflation however, it looks like it could be just a blip as the government’s policy on national insurance and other tax hikes will soon filter into the equation.
“That’s on top of changes to energy prices and council tax also due soon, as well as any further geopolitical escalation we could see.
“Economists suggest September as the peak for inflation.”
“Economists suggest September as the peak for inflation and remain confident that inflationary pressures will eventually subside and return to the 2% target.
“As we’ve seen though, predicting inflation can be a fool’s errand – particularly in this economic climate. All eyes will be on the MPC to see how it responds to this changing picture. While its gradual and careful approach is important and works to a point, we also need decisive action to safeguard the economy and support the key drivers of economic growth – such as the property market.”
POSITIVE SIGN
Simon Webb, managing director of capital markets and finance at LiveMore, added: “A slowdown in inflation is a positive sign and offers hope that financial pressures may start to ease.
“Compared to this time last year, we’re in a better position and this inflation reduction will support growing optimism that interest rates could continue to fall.
“While the impact of higher rates is still being felt, particularly by those on fixed incomes or who have moved onto standard variable rates, for older borrowers, the good news is that the mortgage market has evolved, with more flexible options available than ever before.
“Ensuring people aged 50 to 90+ are aware of their choices will be key to helping them navigate this period and plan for the future with confidence.”
BALANCING ACT
Daniel Austin, chief executive and co-founder at ASK Partners, said: “A slight dip in UK inflation offers a welcome signal following last week’s interest rate hold, though it highlights the ongoing balancing act amid Trump-driven market volatility, evolving tariff policies, and potential UK tax changes from today’s Spring Statement.
“The key question now is how quickly lenders adjust mortgage rates and whether this pause on rates holds.
“For homeowners and buyers, the desire for lower borrowing costs is clear, but persistently high fixed mortgage rates may limit immediate relief. Still, a more stable rate environment could gradually rebuild buyer confidence, especially among those waiting for clearer economic cues.
“For investors and developers, the path toward rate cuts remains pivotal.”
“For investors and developers, the path toward rate cuts remains pivotal, with even a modest inflation drop supporting that trajectory.
“Demand continues to thrive in resilient, high-growth sectors like co-living and build-to-rent, where persistent supply shortages keep capital flowing.
“As potential policy shifts and economic changes loom, agility is crucial. If rates ease, as some anticipate, it could fuel a more sustained recovery in transactions and investment flows.
“However, with uncertainty still clouding the outlook, strategic financial planning remains essential to navigating what comes next.”
BREATHING SPACE
Martyn Smith, managing director at Black & White Bridging, said: “With inflation dropping to 2.8%, down from 3% last month —lenders and borrowers finally have some breathing space.
“Lower inflation levels are key to rebuilding confidence in the housing market, and if this trend continues, we should see more competitive borrowing options emerge.
“Bridging and development finance will be crucial in unlocking stalled projects and boosting supply, but policy support is needed to keep momentum going. If today’s Spring Statement doesn’t address planning bottlenecks and investment incentives, we risk missing a prime opportunity to get Britain building again.”
CRUCIAL MOMENT
Nick Hale, chief executive at Movera, said: “With inflation unexpectedly fallling to 2.8% in the 12 months to February, today’s Spring Statement comes at a crucial moment for the housing market.
“Lower inflation should give the Bank of England more confidence to continue cutting rates, which would help bring down mortgage costs and improve affordability for buyers.
“The government has made economic growth a priority, and housing plays a key role in that. A stable inflation outlook gives the Chancellor room to introduce measures that could boost housing supply and support homeownership. Will today’s statement deliver the policies needed to unlock growth and make homeownership more accessible?”
PRICE PRESSURES STABILISING
Richard Pike, chief of sales and marketing at Phoebus Software, said: “Today’s inflation figures are a surprise, and could be interpreted that price pressures may be stabilising.
“For homeowners and prospective buyers, this could signal hope that interest rates may ease sooner rather than later, improving affordability in the mortgage and housing markets.
“However, challenges remain, and stability must be maintained to support borrowers and ensure long-term financial resilience. We wait to see the economic impact of the increase in taxes taking effect from next month.”
SLOW AND STEADY
Ben Thompson, deputy chief executive, Mortgage Advice Bureau, said: “According to our latest poll, 62% of financial services professionals believed last month’s inflation rise would have a negative impact on buyer confidence.
“However, inflation falling to 2.8% is likely to counterbalance this, leaving aspiring and current homeowners breathing a sigh of relief.
“This slow and steady approach should give further comfort to prospective buyers.”
“Coupled with the Bank of England’s decision to hold interest rates last week, this slow and steady approach should give further comfort to prospective buyers. Borrowers are slowly getting used to the fact that mortgage rates are unlikely to fall much further from here, and that this is broadly where new pricing is.
“This is where the value of using an expert adviser cannot be underestimated. They’ll navigate current market conditions to provide you with options bespoke to your financial needs, so you can get mortgage ready.
“In the meantime, focus must now shift to today’s Spring Statement, and how else the government can make homeownership more affordable in current market conditions, and, of course, drive economic growth.”
