Falling UK inflation could herald some good news for BTL landlords over the coming months, according to mortgage experts, despite today's (21st March) decision by the Bank of England to 'hold' its base rate.

Inflation was down to 3.4% in February, from January’s 4% - its lowest rate for nearly two and half years - which had fuelled hopes that the Bank of England would cut interest rates this week. It has instead keep them unchanged at 5.25% for the fifth consecutive time as it continues to wait for further evidence that inflation is falling.

Gavin Richardson, MD of mortgage broker MFB (pictured), believes the Bank of England will likely remain cautious due to volatile money markets, holding the current rate until June at the earliest.

As SWAP rates are the primary influence for most BTL mortgage rates rather than the Bank of England base rate (BBR), these latest inflation figures will give the markets some confidence, possibly prompting minor tentative reductions in rates, he tells LandlordZONE.

“Come June, when the MPC will most likely agree to reduce BBR, we will hopefully see more confident mortgage rate reductions, which will certainly be a relief for landlords who’ve faced many challenges trying to maintain profit margins over the last couple of years,” adds Richardson.

Dramatically

Rates on average five- and two-year fixed mortgages eased dramatically in January as lenders engaged in a rates war to secure fresh business. However, they edged back up again in February as these lenders responded to the prospect of interest rates remaining higher for longer, according to Bestinvest by Eveylyn Partners.

Stubborn core inflation is the Bank of England’s biggest headache, which means rate cut expectations have moved further into the distance, mortgage costs have crept up and downwards pressure on prices has increased, adds Tom Bill (pictured), head of UK residential research at Knight Frank.

“A rate cut this month or in May would boost buyer sentiment, but summer appears a more realistic prospect than spring based on current evidence.”

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