Good for mortgages, bad for food prices

Wander around your local supermarket and you’ll be hard-pressed to find many things on the shelves that are healthy for your finances; The increases in food prices are accelerating.

The cost of the weekly shop is and will continue to be a concern for millions of people.

Beyond food, prices for goods and services in general are also increasing, but the pace of these price increases has slowed.

And this looks set to bring more good news in terms of the cost of borrowing, especially mortgage rates for homeowners and first-time homebuyers.

Prices almost always rise. Official statistics show the movement in the cost of hundreds of goods and services in the UK.

What matters is the rate of increase and the inflation rate is published every month by the Office for National Statistics (ONS).

on wednesday, ONS says inflation rate has fallen to 3.6 per centThis means prices are rising more slowly than before, raising hopes that inflation has peaked.

Dig a little deeper into the data; You’ll find more details on what’s behind the latest trends.

For example, while fish, vegetables, chocolate and confectionery were among the products whose prices increased, there was a slight decrease in fruit prices.

A recent study by the Bank of England found that on average people are still buying the same amount of food but paying more for it. However, they are changing the way they shop.

“Concerns about rising food costs and utility bills are still at the top of conversations,” the statement said.

“Households continue to change their shopping habits to reduce spending, such as buying more vegetables and reducing meat consumption.”

“The cost of basic foods like bread, meat and potatoes is higher than even a month ago,” says Danni Hewson, head of financial analysis at investment platform AJ Bell.

However, it also points to a ray of hope; The fall in the inflation rate means the Bank of England is now more likely to cut interest rates in December.

The bank uses its benchmark interest rate, which largely affects the cost of borrowing for households and businesses, to bring inflation to its target rate of 2%.

“Inflation is well above 2%, which is the Band of England happy place,” says Bestinvest personal finance analyst Alice Haine.

But he says the latest figures could pave the way for the sixth rate cut since August last year.

The prospect of a rate cut has already caused lenders to make changes. In recent weeks, many major lenders have cut interest rates for people taking out new fixed-rate mortgages or renewing existing mortgages.

“There has been particular emphasis on pricing for house movers, with some of the best rates available for purchases,” says David Hollingworth of mortgage broker L&C.

Data from financial information service Moneyfacts shows that the average rate on new two-year fixed deals has fallen to 4.88%, and on average five-year fixed deals it has fallen to 4.93%.

Average rates for those who can only put down a 5% or 10% deposit (mostly first-time buyers) now look lower than at any time in the last two or three years.

Inflation is just one factor in lenders’ decisions to lower mortgage rates.

Christmas is generally a quiet time for the housing market as potential buyers and sellers focus on turkeys and ornaments.

So they may be lowering rates in an attempt to encourage tradition.

It is not possible to say the same for savings rates. “There is very little competition,” says Caitlyn Eastell of Moneyfacts.

This has been compounded by the fact that most buyers, sellers and savers have put their plans on hold until they find out what will happen in the Budget announced by Chancellor Rachel Reeves on 26 November.

The budget looms large in the housing market, with talk of taxation on high-value properties as well as economic activity in general.

Reeves wants to take measures to reduce the inflation rate and help people with living expenses. But it also needs to bring in more money or cut government spending to comply with its own fiscal rules.

It’s a delicate balancing act that will affect individual and family finances, affecting the amount of money people have to spend at the supermarket, the appetite they have to save, and also the ability to buy or sell a home.