The UK’s rate of inflation has fallen to 3.4% for the year to February, a figure down from 4.0% in January.

According to the latest data published by the Office for National Statistics (ONS), the annual rate of consumer prices index (CPI) inflation was the lowest since September 2021, when it was 3.1%.

The easing in the annual rate between January and February was a result of prices rising by 0.6% on the month, compared with a rise of 1.1% between the same months in 2023.

In terms of the largest downward contributions to the monthly change in the CPI annual rate, food, and restaurants and cafes had the greatest impact, while the ONS reported that the largest upward contributions came from housing and household services, as well as motor fuels.

Deputy CEO at Mortgage Advice Bureau, Ben Thompson, suggested that with inflation now just 1.4% above the 2% target set by the Bank of England (BoE), it could be the “starting gun we’ve been waiting for”, in terms of getting clearer visibility on when the BoE’s base rate may start to come down.

“The last month has seen volatility in swap rates, with some lenders increasing their mortgage rates as a consequence,” Thompson said.

“However, with inflationary pressures now easing, this could lead to an easing in swap rates and therefore the start of mortgage rates softening again. If this happens, it would be perfectly in time for the busy period of year for the housing market, and would also help many thousands of borrowers to remortgage to better rates once their current deals have come to an end.”

The BoE will announce its next decision on interest rates tomorrow, with the Bank’s base rate currently still sitting at 5.25%.

While some economic forecasters may expect the latest inflation data to be factored into account, head of financial analysis at AJ Bell, Danni Hewson, said the inflation figures are “unlikely to provide much more than a talking point” for the BoE’s Monetary Policy Committee members.

“The anticipated impact of a falling energy price cap will have already stoked expectation that the Bank’s 2% target is within reaching distance,” Hewson commented. “Until that point, a twist of the hand isn’t expected.

“For households, bruised and bloody after two years of rising prices, today’s number won’t provide a great deal of comfort. For mortgage holders who have already dropped off ultra-low fixed rates, adjustments will have been made and some would have been deeply uncomfortable.”

Hewson added: “Savings have been raided, unwanted property has been sold off and people have been trading down wherever they’ve been able to.

“With rental prices still at a premium and more than a million households heading towards that mortgage switching cliff edge this year, the cost of living crisis is still very real.”

---