The drop in inflation is positive news for households as it means incomes might be less stretched than they have been.

The Consumer Prices Index (CPI) significantly fell to 4.6 percent this month – the lowest level in two years – with the slowdown coming after energy prices soared last year.

However the decline in the headline rate does not mean prices are reducing, just that they are rising less quickly compared to previous months.

However some households are already taking comfort from bumper pay rises, as average wage growth is now outstripping inflation, so a retreat in price rises might feel like “a double win”.

Fixed-rate mortgages are on track to near four percent by the end of the year as lower-than-expected inflation figures fuel optimism for homeowners.

Alice Haine, Personal Finance Analyst at Bestinvest, explained the Bank of England may hold interest rates at 5.25 percent for now and eventually cut them to “soften the blow” from high mortgage rates, following the fall in inflation

Mortgage brokers have hailed the drop as “relief” for mortgage borrowers, increasing the likelihood of a pre-Christmas price war among lenders.

Ashley Thomas, director at London-based broker, Magni Finance, suggested rates could even start with a three before 2023 is out: “Lenders are getting more aggressive with rate cuts. I wouldn’t be surprised to see rates drop below four percent by the end of the year.

“The next inflation data will be crucial for mortgage lenders, and expect a lot of rates to reduce if inflation has dropped significantly.”

HSBC now offers a 4.59 percent five-year fixed rate for buyers with a 40 percent deposit or equity in their home. Nationwide, NatWest and TSB slashed their mortgage rates last week, amid bets that interest rates will start falling from their current level of 5.25 percent next year.

Nationwide became the first major high street lender to offer a two-year fixed rate below five percent. The rate of 4.99 percent is available to those purchasing at 60 percent loan-to-value ratio.

Ranald Mitchell, director at Charwin Private Clients commented: “This significant drop in inflation will come as a huge relief to everyone and we should now expect further mortgage rate cuts in the days to come.

“Mortgage lenders were already at war with each other on pricing and these inflation figures will only encourage them to go even further, and quicker. It looks like the property market will reignite in 2024.”

Inflation falling so sharply will be a massive boost for mortgage borrowers and the broader property market.

With inflation tumbling to 4.6 percent, the Chancellor has “a golden opportunity” to reignite the UK housing market in his Autumn Statement and not just squander it by slashing stamp duty.

Major lenders like HSBC and Halifax are slashing rates again this week and the base rate is likely to be left on hold.

Rohit Kohli, Director at The Mortgage Stop continued: “For homeowners, who haven’t had to remortgage yet, this will be a welcome relief and offer some hope to their ever-decreasing budgets.

“For those who switched to a tracker, it’s worth starting to speak to your mortgage adviser to see if there are opportunities to save from the highs seen in the summer.”