Development lenders hope falling inflation will result in ‘renewed confidence’ to get Britain building

Development lenders hope falling inflation will result in 'renewed confidence' to get Britain building

Inflation has fallen in the UK to its lowest level in almost three years.

The Consumer Prices Index (CPI) rose by 2.3% in the year to April 2024, according to the Office for National Statistics.

This was compared to a rise of 3.2% in the 12 months to March 2024.

Falling gas and electricity prices resulted in the largest downward contributions, partly offsetting rises in motor fuels.

Core CPI — excluding energy, food, alcohol and tobacco — rose by 3.9% in the year to April 2024.

This was down from 4.2% registered in the 12 months to March 2024.

Neil Rudge, head of enterprise at Shawbrook, said the latest fall in inflation rate will be met with renewed positivity by the UK’s business community.

“With first quarter GDP and real income figures returning to growth, along with the recent FTSE boom, the UK’s economic outlook is looking primed for recovery,” said Neil.

“Furthermore, our own research has shown that businesses are feeling more confident now compared to last year, spelling positive news for times ahead.

“While there may be cause for a subtle celebration, and the recent uptick we’ve seen in funding enquiries indicates a renewed sense of optimism, businesses should continue to remain cautious and considered as we move through this period of recovery."

Eliot Kaye, managing director at Puma Property Finance, added: “Today’s news of slowing inflation and rising house prices should be a welcome tonic to developers after a tough period of uncertainty around construction prices and end values. 

“We hope that this will give renewed confidence to get Britain building back better — we are certainly ready to fund!”

More specifically, this latest fall in inflation has created optimism that the Bank of England may cut rates, as it is nearer to the central bank’s inflation target of 2%.

According to Daniel Austin, CEO and co-founder of ASK Partners, this could force a rate cut as early as June.

“This potential rate cut is a crucial development, as lower interest rates typically reduce the cost of borrowing,” said Daniel.

“In anticipation of this move, we have already seen major high-street lenders make cuts to mortgage rates.

“This proactive step will start making life somewhat easier for borrowers by lowering monthly payments and reducing overall interest expenses.”

The wider economic repercussions of a fall in inflation could also boost some specific property sectors, such as PBSA.

Dominus’ investment director Sahil Khagram commented: “Today’s news of the inflation rate falling to 2.3% is encouraging — it will help students to better manage their cost of living.

“With rising costs, students continue to battle against the increasing differential between the maximum maintenance loan and the general day to day costs to maintain a basic student living experience.

“As we continue to further develop our pipeline of PBSA developments, a more positive outlook on affordability from students is welcomed.”

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