UK inflation fell to 1.7% in the year to September, the lowest rate since April 2021.

Lower airfares and petrol prices were the main driver behind in the fall, the Office for National Statistics (ONS) said.

The drop in the rate was larger than expected – economists had predicted a 1.9% fall.

It also means inflation is now below the Bank of England’s 2% target, paving the way for interest rates to be cut further next month.

Financial markets have been pricing in a interest rate cut for the UK at the next Bank of England in recent weeks, but the Bank of England is facing growing pressure to also cut interest rates in December as wage growth slows.

Hopes of a double interest rate cut boost before Christmas have increased after the latest showed that wage growth slowed again.

Regular pay went up by an annual rate of 4.9% in the three months to July – from 5.1% in the previous quarter.

That was the lowest level since June 2022, although still 2.6% above the CPI inflation rate.

The slowdown emerged ahead of crucial inflation being released today.

Bank governor Andrew Bailey suggested recently that rate reductions could be ‘more aggressive’ if the economic picture develops as predicted.

The Bank cut interest rates from 5.25% to 5% in August, which was the first drop in more than four years.

UK estate agents have already reported more buyer interest after August’s BoE rate cut.

A further cut to interest rates would be a welcome move for property buyers, sellers, and of course, estate agents.

Nathan Emerson, CEO at Propertymark, said: “Today’s news will likely bring yet more positivity and confidence across the housing market. We are beginning to see the foundations for a strong 2025, which could be further strengthened with a potential dip in the base rate when the Bank of England next meet in early in November. We are already witnessing many lenders improving their offerings, which is proving very welcome news for home buyers across all the price ranges.”

A recent Reuters poll found that nearly 80% of economists, 49 of 65, expect one more rate cut this year. But that was before the latest inflation data.

The Bank of England has two more more meetings left this year to decide on interest rates, in November and December.

Many analysts expect the Bank to reduce rates at its meeting in November. However, there is growing speculation that there will be a rate cut in December as well, which would likely to put the end-year rate at 4.5%.

The co-founder and CEO of GetAgent.co.uk, Colby Short, commented: “We’ve seen a strong uplift in buyer activity so far in 2024 by way of consistently strong mortgage approval levels and our recent research found that this has finally started to filter through with respect to transactions, with monthly sales volumes topping 100,000 in August for the first time since December 2022.

“However, it’s fair to say that buyer activity remains somewhat restrained due to the higher cost of borrowing, with the base rate remaining substantially higher than many buyers have become accustomed to in recent years at five percent.

“The good news is that the Bank of England has been vocal in its intentions to further cut rates before the year is out and this should see mortgage rates follow suit, with the potential they could fall to sub-three percent by the middle of 2025.

“For sellers, this means more demand and buyers acting with greater confidence due to improved affordability, which, in turn, should help cultivate further positive house price growth in 2025.”

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