July 2023 UK Inflation Update

Inflation has been a contentious hot topic throughout the past year, with a range of reactions. However, recent developments suggest a shift towards a more optimistic outlook. The Office for National Statistics has recently reported a significant drop in the UK’s inflation rate to 7.9% in the year to June 2023. This is the lowest level observed in over a year. This news is particularly heartening for homeowners with variable rates and potential homebuyers looking to enter the market. Better yet, experts from the National Institute of Economic and Social Research anticipate further declines in interest rates. We can expect a review of July to appear in the next couple of weeks.


How Is Inflation Measured

To truly understand inflation’s impact, we must first understand how the rates are measured. Simply put, the monthly inflation figures represent the percentage increase in prices compared to the same date in the previous year. To calculate inflation, products are categorized into different groups such as “clothing and footwear,” “housing and household services,” “transport,” and more. The primary “headline” measure used is the Consumer Prices Index (CPI), which was referred to at the beginning of this article as the “UK’s inflation rate”. Economists and policymakers gain essential data by analysing the CPI and other metrics to make informed decisions on monetary policies and economic stability.


Mortgage Rates in July 2023

The decline in the inflation rate has had an impact on mortgage rates in July 2023. In the beginning of the month, many of the larger mortgage providers responded to the shift by cutting rates on their fixed mortgage deals. As of Friday, the 28th of July, the average mortgage rate stood at 6.81%, indicating a notable drop compared to previous periods

including the week before. This reduction suggests that the peak of interest rates may be lower than initially anticipated! For prospective homebuyers, this presents a great opportunity to explore purchasing a house as borrowing costs become more affordable.


Benefits for Homeowners with Variable Rates

Homeowners with variable-rate mortgages stand to benefit from the decrease in the inflation rate. If interest rates follow suit and continue to decline in response to lower inflation, it could translate into reduced monthly mortgage payments. This financial relief could provide greater stability and flexibility for homeowners.


Encouraging Homeownership

The drop in inflation and reduction in mortgage rates offer a positive signal to potential homebuyers. As borrowing costs lower, the prospect of homeownership becomes more accessible. Increased affordability may incentivize renters to consider homeownership, boosting the demand in the housing market. However, despite the positive outlook, prospective buyers are advised to carefully assess their financial situations and consider long-term implications before making significant financial commitments. And please remember that the First Mortgage team is always here to help.


July 2023 Inflation Update

As we look towards the rest of 2023, homeowners with variable-rate mortgages may experience potential cost savings, while future homebuyers may find a better market with lower mortgage rates. As the economy continues to evolve, it is essential to monitor inflation trends and interest rate adjustments to make informed financial decisions. You can always contact one of our advisors for free information if you want to buy a house or remortgage.



– https://www.theguardian.com/business/2023/jul/30/mortgage-rates-ease-as-bank-of-englands-bitter-medicine-shows-signs-of-working

– https://www.gbnews.com/money/mortgage-rates-relief-after-inflation-sees-bigger-than-expected-drop-ahead-of-crunch-decision

– https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/june2023

– https://www.bbc.co.uk/news/business-12196322