Interest rates and inflation: A delicate balance

At the latest Monetary Policy Committee meeting in early May, the Bank of England reduced the base rate by 0.25 percentage points to 4.25%, marking the third rate cut in the past six months. However, a sharper-than-expected rise in inflation has introduced a sense of caution for future rate decisions.

Headline inflation accelerated to 3.5% in April, up from 2.6% in March, driven by increased energy and water bills, plus a significant spike in airfares. Core inflation, which excludes volatile items, also climbed to 3.8% from 3.4% in the previous month.¹ Both measures exceed the Bank’s 2% target, suggesting that further rate cuts throughout the year may be limited while they aim to get inflation under control. The Committee will meet five more times this year to set the base rate (June, August, September, November and December).

The ripple effect of inflation has affected currency markets, with the British pound strengthening to its highest level against the US dollar in over three years. This shift reflects market expectations of fewer interest rate cuts in the UK compared to the US.

Competitive mortgage deals return

Mortgage rates have been decreasing, with lenders influenced by the Bank of England’s sustained run of earlier rate cuts and lower swap rates. We even saw a mini price-war last month, with most major high street lenders bringing back deals under 4%. Some lenders are also relaxing their criteria, offering low- or even no-deposit mortgages.

It’s great to see lenders providing more options for first-time buyers, but we’d always recommend speaking to a qualified mortgage broker and getting personalised advice on your financial situation before rushing into a deal.

Wondering what this all means for your future or current mortgage? Moneybox Mortgages brokers offer free, personalised advice and can compare thousands of deals from over 90 lenders, to help you secure the right one. No jargon, no pressure. Speak to a broker today and take the next step with confidence.

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House price data shows moderate growth

If you’re thinking about buying a home this year, you’re probably wondering: Are house prices going up or down? The answer isn’t always straightforward, as it depends on where you’re looking to buy and which data you’re looking at.

Two of the main sources that report on house prices are the UK House Price Index (UK HPI) and the Rightmove House Price Index. We can also look at lender-specific indices, like the Nationwide House Price Index. Here’s what they’re showing right now, and how they can help you as a buyer:

  • UK House Price Index (UK HPI): This is the most official measure, based on actual completed sales (so what buyers like you are really paying). The latest figures (for March 2025) show prices up 1.1% month-on-month and 6.4% year-on-year, with the average UK home now costing around £271,000.² It’s a reliable indicator, but because it’s based on completed purchases, it’s always a couple of months behind.
  • Rightmove House Price Index: This one looks at asking prices (what sellers are listing their homes for right now). In May, the average asking price hit a record high of £379,517, a small rise of 0.6% from April.³ It’s quicker to update than the UK HPI, so it gives a good sense of market momentum, but remember, asking prices aren’t always the same as what homes actually sell for.
  • Nationwide House Price Index: Using Nationwide’s own lending data means this index is closer to actual transaction values, but may lag behind real-time market shifts. While May figures aren’t released yet, April data indicated a 0.6% monthly decrease in house prices, with a 3.4% increase year-on-year.⁴

Why this matters 🔍

  • If you want to know what you might actually pay for a home, the UK HPI is your best guide. Just bear in mind the prices reflect sales from a few months ago.
  • If you’re trying to understand what’s happening right now (in other words, how competitive the market is, and how much sellers are hoping to get), the Rightmove Index is super helpful.
  • The Nationwide House Price Index is somewhere in the middle – it’s accurate, but not complete, as it only gives you a picture of Nationwide mortgages.
  • Using all of them together can give you a well-rounded picture of where the market’s heading, and help you feel more confident as you start your search.

Mortgage approvals dip slightly

If you’re getting ready to buy, or shopping around for a mortgage, it can be helpful to understand how many mortgages are being approved each month – as a way to get a feel for how busy or quiet the market really is. The most recent data indicates that UK mortgage approvals decreased to 60,460 in April 2025, down from 64,300 in March.⁵ This decline suggests a slight cooling in buyer demand, possibly influenced by the recent changes in stamp duty thresholds and ongoing economic uncertainties.

That might sound like a red flag, but actually, a small drop in approvals can create opportunities for first-time buyers. With a little less competition in the market, you may find it easier to take your time when viewing properties or even negotiate on price. Sellers may be more open to offers too. So, if you’re feeling ready to make a move, this could be a good window to do so.

1. Source: Office of National Statistics (ONS) CPI Annual Rate of Inflation
2. Source: GOV.UK Land Registry (UK House Price Index for March 2025)
3. Source: Rightmove House Price Index for May 2025
4. Source: Nationwide House Price Index for April 2025
5. Source: Trading Economics, UK Mortgage Approvals for April 2025