Loading…

Market Update - April 2024

The latest commentary on the UK economy, mortgage and savings markets.

  • MPC vote to hold rates as inflation and labour market conditions continue to ease 
  •  Mortgage approvals return to pre-pandemic levels in February but house prices fall
  • Household savings balances increase in February

Inflationary pressures ease, opening the door to rate cuts later this year


1.    CPI inflation fell to 3.4% in the 12 months to February, down from 4.0% in January. The largest downward contributions to the monthly came from food, restaurants and cafes. Annual core CPI also fell to 4.5% from 5.1% in January. This fall in inflation was a little below the Bank’s forecasts in February. In the latest MPC minutes, the Bank says they expect CPI inflation to fall to slightly below the 2% target in Q2 of this year, marginally weaker than previously expected owing to the freeze in fuel duty announced in the Budget, but then increase above 2% in the second half of the year.


2.    Conditions in the labour market continue to ease. The unemployment rate remained largely unchanged at 3.9% in November to January, but job vacancies fell further in December to February to 908,000, a decrease of 43,000 from September to November 2023. This is the 20th consecutive fall in vacancies – although there remains over 100,000 more vacancies than before the pandemic in March 2020. The number of unemployed people for every job vacancy increased to 1.5 which signals more lax market conditions.


3.    Growth in earnings also fell, as average annual total earnings grew by 5.6% November 2023 to January 2024, down from 5.8% in the previous 3 month period and from the recent peak of 8.5% in June 2023. In real terms, adjusted for CPI, wages increased 1.6%.  Over the next few months many organisations will set wages, where it will be seen if the recent falls in CPI inflation and lower inflation expectations will have an impact. According to a survey by the Bank, the average pay settlement for 2024 is expected to remain elevated with evidence from the Bank’s agents suggesting there will be some upward pressures on wages from indirect effects of the increase in the National Living Wage. However the Bank deemed the risks to inflation from domestic price and wage pressures were now more balanced, however the risk from geopolitical factors were skewed to the upside. 


4.    Market interest rates fell on the back of the MPC minutes, which were interpreted as a signal that Bank Rate is more likely to be cut sooner this year. The first full 25 basis point cut is now priced in for July. In a shift in stance, eight members of the MPC voted to keep the Bank Rate unchanged, whilst one member voted for a 25 basis point cut. Just one month ago, two members had voted to increase the Bank Rate by 25 basis points.


5.    In March the Financial Policy Committee published their Summary and Record for Q1 2024. While the central economic outlook has improved somewhat since December 2023 some risks to financial stability globally have increased such as in global commercial real estate (CRE) markets. UK CRE continues to face pressures, although the pace at which prices are falling has reduced. Some UK banks are also exposed to international CRE market that could lead to losses. However the FPC deem that major UK banks would be resilient to much larger falls in prices. 


6.    The outlook for UK households however has improved since the end of 2023 according to the FPC. Despite many households yet having to refinance away from a relatively cheap mortgage deal, the share of households with high ‘cost of living adjusted’ debt service ratios (COLA DSRs) is expected to increase only marginally this year from 1.4% to 1.6% and remain well below levels seen during the global financial crisis of 3.4%. However the FPC note a survey by NMG Consulting that reveals mortgagors with high COLA DSRs had smaller savings buffers relative to previous years and other mortgagors, making them more vulnerable. 


7.    A consumer survey by the FCA published today shows there has been an improvement in the number of people finding it hard to manage the higher cost of living compared to a year ago. However, there are still more people struggling compared to before the cost of living increase. 
8.    Separately, the BSA’s Property Tracker survey showed that mortgage borrowers were more confident in meeting their mortgage payments in March than at the end of last year.

You can download the full market update here which includes further analysis of the mortgage and savings markets and a range of charts. You will need to be logged in as a BSA Member or Associate Member to access this page.

You may also be interested in...

BSA Card
  • BSA.IndustryResponse Industry Response
  • Conduct Risk & Regulation

FOS Consultation on charging Claims Management Companies & other professional representatives

The BSA strongly supports the principle of charging a fee to CMCs.

BSA Card
  • BSA.Event Event
  • Conduct Risk & Regulation

Annual Update & Networking for Boards

This autumn, the BSA is running its first event designed specifically for Board Members (Exec and Non-Exec) and Board attendees. This in-person e...

BSA Card
  • BSA.Event Event
  • Conduct Risk & Regulation

Consumer Duty: Navigating Board Reports

A free webinar hosted by BSA Associate, docStribute docStribute and Woodhurst are collaborating to bring you this webinar series. Following our pre...

BSA Card
  • BSA.Event Event

Building Societies Annual Conference 2024

Building Societies Annual Conference 2024 8th -9th May, Manchester   The Building Societies Annual Conference is the leading event in the secto...

BSA Card
  • BSA.Event Event
  • Audit & Taxation

Audit, Risk & Regulation Autumn Series

This year's annual update returned in a brand new format with a series of topical webinars covering key areas of audit, risk and regulation. This...

BSA Card
  • BSA.Event Event
  • Conduct Risk & Regulation

Consumer Duty: Linking Customer Outcomes to Customer Experience

A free webinar hosted by BSA Associate, Protiviti This webinar will explore ways firms can effectively test, monitor, and report customer outcomes ...

BSA Card
  • BSA.Event Event
  • Conduct Risk & Regulation

BDO's Financial Services' NED event: Consumer Duty Board Champions

BDO’s Financial Services’ team is delighted to invite you to our first FS NED event for 2024, to discuss the Consumer Duty’s ("the CD") next phase of ...

BSA Card
  • BSA.Event Event
  • Prudential Regulation

Preparing for successful regulatory visits

Two half-day sessions on 24 & 25 January 2024

  • BSA.IndustryResponse Industry Response
  • Conduct Risk & Regulation

GC23-2 FCA Guidance consultation on financial promotions on social media

Our response to FCA GC23-2