Inflation fell to 3.2% in March – consumer credit industry reaction

Latest data from the ONS has found that CPI inflation fell to 3.2 per cent in March, lower than the 3.4% reported in February.

Commenting on the data, Steve Vaid, Chief Executive of the Money Advice Trust, the charity that runs National Debtline, said “Falling inflation is welcome news and will provide some relief for people with already stretched budgets.  

“For the many households left with unaffordable debts due to the recent period of high costs however, the financial fallout is set to continue.  Without urgent support, millions risk being left behind. 

Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said “A second drop in inflation in as many months is a much-needed sign of progress. With inflation now at its lowest since mid-2021, consumers may feel like it’s the time for celebration, but we mustn’t get ahead of ourselves.

“The reality is that the economic climate is a long way from where it needs to be. Millions of people continue to struggle with household bills and credit repayments, worsened by a further slowing in wage growth. Any drop is good news, but we mustn’t lose our perspective on how bad things have been.

“The 2% inflation target is inching closer, so it might not be long before the Bank of England cuts interest rates. So, now is the time for people to squeeze every penny out of the higher rates offered on their savings before they, too, start to diminish.”

Simon Webb, Managing Director of capital markets and LiveMore, said “At 3.2%, we are continuing the mainly downward trajectory of inflation rates that we have witnessed since the peak in October 2022.]

“Imagine a bell curve. At 3.2%, March 2024’s inflation rate is around the same levels as Autumn 2021 when the rate of inflation rose from 3.1% in September to 4.2% in October. The difference is that those inflation figures were the beginnings of a sharp increase in inflation rates all the way up to the October 2022 summit of 11.1%.

“Although our current inflation rate remains way off the 2% goal, consumers can take some solace that inflation is largely on the descent this time round, and our economy does appear to be on the mend, slow though that process may be.

“Older borrowers and mortgage prisoners are continuing to feel the squeeze with the continuing high cost of living. People coming off an interest-only mortgage this side of summer will need to make sure they seek sound advice.”

Alastair Douglas, CEO of TotallyMoney said “Almost every aspect of living has become more expensive over the past few years, and just because inflation has been slowing, for many, it doesn’t mean things are getting any easier. The jobs market has stalled, unemployment is on the rise, company insolvencies have hit a 30 year high, and more than seven million people are struggling with bills and repayments.

“And while there’s hope of a base rate cut this summer, the question is that if and when there is one, how much of a difference will it make, and will the banks even follow suit? Some were painfully slow to pass on any benefits of the previous hikes to savers, and while the rate has remained firmly fixed at 5.25% since last summer, in recent months, they’ve been quietly turning up the dial up on mortgage rates and fees.

“In addition, savings rates have been chipped away, insurance premiums hiked, and the best credit offers watered down. All the while, the regulator has been publicly telling the financial services industry to start acting in the best interests of its customers.”

Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown said  “Inflation in the UK has taken another welcome step towards target, but interest rate cuts remain elusively distant. The drop was widely expected but was slightly less than forecast, with prices at the pumps offsetting a slowdown in food price hikes.

“Although consumer prices are heading in the right direction, it’s not just the headline rate which determines Bank of England action. Policymakers scan other data, and the snapshot of stubborn wage growth out this week continues to be a concern. Unemployment may have risen, but the labour market figures are considered unreliable, and more people out of work isn’t yet translating into a sharp slowdown in wage increases, as there’s still a fight for talent in big pockets of the economy. 

“Core inflation, which strips out volatile food and fuel prices is also cooling, slowing to 4.2%, the worry is that employers could pass on higher wage bills in the form of higher prices in the months to come. It means the interest rate may stay at a painful level for even longer than earlier forecasts, with August or September being increasingly pencilled in.

“Other central banks, particularly the Federal Reserve in the United States, are taking a cautious stance, staying committed to the fight against inflation. Fed chair Jerome Powell has warned that interest rates may have to linger for longer, with confidence ebbing away that the price spiral is being brought under control.”

“Over-stretched homeowners with a remortgage on the horizon will be desperate for a sign that a rate cut is around the corner. Today’s inflation figures show we’re inching in the right direction, but they’ve still got a wait on their hands.

“There are still an awful lot of inflationary pressures the Bank will be keeping a beady eye on. Rising oil prices showed up in higher petrol prices in March, and over time it will feed into the price of everything that’s manufactured, transported or sold in a shop that needs heating and lighting. At the same time, wages are still rising faster than inflation, so the Monetary Policy Committee is not going to be keen to rush into anything, and the market is pricing in a rate rise no earlier than August.

“The banks aren’t keen to make any sudden movements in the mortgage market. Today’s fall was smaller than expected, so is unlikely to inspire anything significant. After the cost of deals dropped quickly at the start of January, more stubborn inflation data convinced the banks they’d got ahead of themselves, and rates started creeping up again. Over the past month, the average 2-year fixed rate mortgage has stuck around 5.8%, and there’s every chance today’s figures inspires very little movement from here.

“For re-mortgagers, and those hanging onto a variable rate while they wait for cheaper fixes to emerge, there is still hope. Over the coming months, we will see mortgage rates ease. Fixed deals will get cheaper, and they should finally see the huge pressure on their budgets start to ease. This will come as a relief. Figures from the HL Savings & Resilience Barometer shows that the average earning household has just £117 left at the end of the month, which is leaving homeowners with very little room to manoeuvre if they’re hit by the unexpected.”

Richard Carter, CEO of Lenvi said “With 2023 finishing in a recession and months of turbulence in the UK economy, decreasing inflation will bring hope for households and businesses that the Bank of England may begin to put forward a cut in interest rates, relieving some pressure through reduced borrowing costs.

“Our latest data on borrowing habits found that over a quarter of people (26%) have borrowed money to make their month-to-month costs more manageable, with 14% borrowing specifically for bills. Although inflation rates are heading in the right direction, the volume of people still relying on borrowing to cover basic living expenses shows an ongoing need for swift action and support in the lending sector. Lenders should recognise their responsibility to provide robust financial tools and education to protect and empower those grappling with these hardships.”