The figure is at the lowest level the CPI has been in almost three years, down from 3.2% reported by the ONS in March and 8.7% announced in April 2023.

Falling gas and electricity prices contributed the most to the drop in inflation last month, while rising motor fuel prices partially offset the results.

Specialist finance industry reacts to fall in inflation

Paresh Raja, CEO at Market Financial Solutions:

“At long last, the UK’s rate of inflation has fallen to around the BoE’s target of 2%, offering a significant reprieve for investors after three years of eyewatering price increases.

“With purchasing power now returning to a more normal level, the positive house price data that we have witnessed in the past week is likely to be compounded as more investors look to re-enter what is now a recovering market.

“However, it is important to acknowledge that while inflation is trending downwards, we are still not at a point where interest rates are going to be reduced significantly.

“Therefore, it is crucial that lenders and brokers play a supportive role for investors as they transition to a more open monetary landscape.

“By providing bespoke financial products and a high level of certainty, they can ensure continued positive momentum as inflation continues to fall.”

Ben Nichols, interim managing director at RAW Capital Partners:

"Borrowers, brokers, and lenders can afford themselves a quiet sigh of relief as inflation continues its retreat towards the Bank of England’s 2% target.

“With inflation seemingly under control, the likelihood of summer interest rate cuts grows more certain — a welcome development for homebuyers and mortgage-holders alike."
 
“Now, it’s important to note that rates won't decrease as quickly or significantly as they rose, but a stable inflation climate should still boost economic confidence, encouraging investment and growth in the UK property market.

“What's more, with many investors having paused their buying plans in recent months, pent-up demand could spark robust market activity in the short to medium future.”

Mark Harris, chief executive at SPF Private Clients:

“It is great to see inflation falling so rapidly but, because it is not as much as forecast, this will make a rate reduction in June less likely unless the Bank of England is ready to be bold and brave.

“It’s a shame when what is essentially positive news is seen as disappointing.

“There is a sense that some buyers and sellers are waiting for that first rate reduction before taking action.”

Speaking to the Newspage news agency, Akhil Mair, director at Our Mortgage Broker, said:

"This lower-than-expected inflation rate suggests a positive shift for borrowers and the property market.

“For borrowers, the reduced inflation rate could mean more stable interest rates in the near term, potentially making mortgage repayments more manageable.

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“This trend is favourable for the property market as it may boost buyer confidence and support sustained market activity.”

Ian Hepworth, director at Funding Solutions UK Limited:

"It is important to remember that falling inflation does not mean falling prices — it simply means that prices are not rising as quickly; however, where it may impact is by triggering a reduction in the bank base rate.

“This would impact on the cost of borrowing for both households and businesses [and] free up cash to spend on goods and could allow businesses to borrow cheaper and expand quicker."

Ranald Mitchell, director at Charwin Private Clients:

"This inflation data, clocking in at 2.3% instead of the anticipated 2.1%, is a bittersweet mix of relief and regret.

“As it came in slightly above expectations, this dims the immediate prospects of a June base rate cut by the Bank of England.

“However, it’s still a sign of economic stability. Disappointingly close to the coveted 2% target, this figure does foster optimism of cuts to come — we may just have to wait that bit longer."

Douglas Grant, group CEO at Manx Financial Group:

“The financial constraint, often resulting from a shortage of external financing —  combined with a potentially unprecedented and volatile environment characterised by ongoing conflicts, multiple elections, a tightening labour market, and persistent cost-of-living challenges — continues to put pressure on SMEs and our national economic growth.

“The current government has demonstrated the effective implementation of short-term loan schemes, and we advocate for the next government and treasury to continue this focus.

“Prioritising the establishment of a permanent government-backed loan scheme, tailored to resilient sectors and involving both traditional and non-traditional lenders, could be instrumental.

“Such a permanent scheme has the potential to play a pivotal role in unlocking economic resurgence for numerous companies, thereby sustaining the overall economy — especially as we remain in an uncertain economic environment.”

Katie Pender, managing director at Target:

“Today’s inflation figure is great news . . . Could this herald a much-anticipated interest rate cut this summer, making borrowing cheaper for homebuyers?

“However, we mustn’t forget the many homeowners who will still be tied into higher mortgage rates for some time.

“Affordability and supply will remain significant issues and, with a general election imminent, whoever forms the next government must tackle these.”

Emma Jones, managing director at Whenthebanksaysno.co.uk:

"Though the number wasn't as low as expected, I am feeling positive as we move through 2024 that this will mean rate reductions from the Bank of England are on the way.

“This is exciting news for homeowners who are currently sat on tracker products waiting for cuts that will ease the burden of higher mortgage payments.”

Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial:

"With all the good news surrounding the economy, it’s no wonder inflation was hotter than predicted.

“This signals bad news for homeowners, as it’s the excuse the central bank needed to keep rates on hold for longer.

“It's further evidence there won’t be a rate cut this summer."