Inflation could fall to 1% by the end of the year, a leading economist has claimed.
Samuel Tombs, UK economist at Capital Economics, said producer price indicators, the strength of the pound making imports cheaper, and political pressure on energy bills were likely to see inflation ease further for the rest of the year.
"Against this low inflation backdrop, we believe the MPC is likely to tread cautiously and raise interest rates only very gradually over the coming years," he said.
First-time buyers face having to pay 10.7% more to get on the property ladder than they did a year ago, new figures show.
The typical starter home now costs £199,000, according to the Office for National Statistics.
The news follows calls for the Bank of England to take action against spiraling values, with some urging a dilution of the controversial Help to Buy scheme for buyers with lower deposits.
The Government says the scheme is working as intended to reach people who need its help the most.
Despite a recent fall to the lowest level since 2009, inflation (1.5%) still remains comfortably above the average rate of pay increases (0.7%).
This means the average worker's wages are still falling in real-terms, according to the latest available figures.
The surge in UK house prices over the last year was largely driven by London, which saw an overall increase of 18.7% in the year to March 2014.
Prices in the south east (8.9%) and east (8.5%) of England also contributed to the growth.
House price increases by country
- England: 10.4%
- Scotland: 4.8%
- Wales: 3.3%
- Northern Ireland: 2.6%
Prime Minister David Cameron has welcomed the fall in CPI inflation to 1.5%, tweeting that it means "more stability and financial security for everyone".
Good news that inflation is at its lowest for 5 years - it means more stability and financial security for everyone. #LongTermEconomicPlan
The fall in the Consumer Prices Index (CPI) measure of inflation to 1.5% marks the lowest in four-and-a-half years.
Falls in the cost of transport services, particularly air fares, were the largest contributor to the fall, the Office for National Statistics has said.
Heavy discounting by supermarkets also provided a large downward effect.
CPI equalled the rate seen in October 2009. It was last lower, at 1.1%, in September 2009.
UK house prices have leapt by 9.9% in the 12 months to April to reach a new high of £260,000 typically, Office for National Statistics figures show.
The rate of Retail Price Index (RPI) inflation - which includes housing costs - fell to 2.4% from 2.5% the previous month, the Office for National Statistics said.
The Consumer Prices Index (CPI) measure of inflation was 1.5% in the year to May, down from 1.8% the previous month.
CPI inflation has now been at or below its 2% target for six months.
Labour said the Government is "complacent about the cost-of-living" crisis after inflation rose to 1.8% today which stalled hopes for a pick-up in real terms wages.
These figures underline why this Tory-led government is wrong to be so complacent about the cost-of-living crisis.
Wages after inflation have fallen by an average of £1,600 a year since 2010 and the link between the wealth of the nation and family finances is broken. A huge turnaround is needed to ensure working people aren’t worse off than when David Cameron came to office.
While the Tories try to deny it even exists, Labour has a clear plan to deal with the cost-of-living crisis and earn our way to higher living standards for all, not just a few at the top.