Inflation has fallen to 1.7 per cent in the 12 months to September 2024, falling below the Bank of England’s 2 per cent target for the first time since April 2021.
The latest data from the ONS revealed inflation fell after stagnating in July and August when it remained at 2.2 per cent.
According to the data the largest contributor to the drop in inflation came from transport, specifically air fares and motor fuels.
Dean Butler, managing director for retail direct at Standard Life, part of the Phoenix Group, pointed out that unless the chancellor were to make a shock triple lock change at the Budget, the state pension will rise by 4.1 per cent next spring in line with average earnings.
Meaning next year’s full new state pension is set to reach £11,975.60 annually, an increase of £473.
“This will come as welcome news to many, however there are possible tax implications for pensioners. The personal allowance, which is the amount of income you can receive before paying tax, has been frozen at £12,570 since 2021-2022 and currently remains fixed for quite a few years to come.
“This means that the full new state pension payment has grown from 70 per cent of the allowance in 2019/20 to a likely 95 per cent next year, leaving pensioners with only £594.40 of headroom before they begin paying income tax,” he added.
Richard Flax, chief investment officer at Moneyfarm thought today’s figures cleared the path for another 25-basis point rate cut in November, following the 25 bps reduction in August.
“The underlying conditions support this move – energy prices have eased, the economy has cooled, and the labour market has stabilised.
“Given the fragile state of the economy, with anaemic growth, another rate cut seems increasingly likely. By early November, the MPC will also be able to consider the outcomes of the Autumn Statement at the end of October, allowing for a more informed decision,” he explained.
While Rachel Hunnisett, director of mortgage distribution at April Mortgages, said the figures were “good news” for British borrowers and the broader property market.
She added: “The fact that headline CPI came in well below consensus will be music to the ears of borrowers. However, the past fortnight or so has once again shown how volatile markets are, with many lenders raising their rates to reflect market concerns around both the oil price and Autumn Budget.
“All this volatility around the direction of rates, and the sheer number of variables that can change market conditions very quickly, highlights how exposed borrowers can be if they are remortgaging regularly.
“In such a volatile political and economic climate, certainty of mortgage payments is becoming even more valuable for a growing number of borrowers.”
alina.khan@ft.com
