According to the Consumer Price Index (CPI) the price of goods and services went up a little less in the year to March than in the year to February, when inflation was 3.4%.
Whilst it is good news inflation is easing, economists had predicted inflation in March would be 3.1% and it has therefore come in higher than expected.
As such there were concerns the Bank of England may push back plans to cut interest rates.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “Naturally, most households would want an interest rate cut to happen as soon as possible to reduce the impact of high borrowing costs, but they may have to wait longer than hoped with economists divided on when a rate reduction will happen.
“While some are tipping a summer rate cut as early as June, others expect a change in August or even in the autumn.”
Advice to those with mortgages who are due to buy a home or remortgage soon is to stay vigilant in the run up to the application, and during the process too.
David Hollingworth, associate director, communications at L&C Mortgages said: “With uncertainty still in the air as to how quickly base rate may fall, those holding out for further cuts may find themselves in for a long wait.
“The better approach could be to secure a rate now and keep a close review of movements before completion. A move to a better rate can still be made but a rate is already in place if things take a turn and rates edge higher.”
How will inflation slowing in March impact my savings?
For those with savings it’s a mixed picture, said Haine. On the one hand the cost of living is falling means more savers will be earning a real return from their money.
But, on the other hand, savings rates have peaked with rates on non-ISA accounts falling on average in recent weeks.
There are currently 1,364 savings accounts that beat inflation, according to Moneyfacts.co.uk.
Haine said: “Savers keen to make their money work as hard as possible should hunt out the best rate they can find – while the top deals remain in place – to prolong the amount of time they receive a healthy return on their rainy-day pots.”
She added: “Stashing too much in a regular bank or building society account is not entirely risk free, however. Savers can find themselves paying tax on savings interest because they have breached their Personal Savings Allowance (PSA), an allowance that has remained frozen since 2016 when savings rates were much lower.”
If you are a basic rate tax payer your PSA is £1,000 – this is the amount you can earn in interest before it is taxed. For higher rate tax payers the PSA is £500 and for additional rate tax payers it’s £0.
Haine suggested for those who are likely to breach their allowance, an ISA would be a good option. They allow savers to stash up to £20,000 this tax year without incurring tax on interest or capital gains.