Yields on both the two and ten-year UK government bonds dropped in the wake of better-than-expected inflation figures, offering some respite to mortgage holders.
Two-year gilts fell to 4.842% from 5.079%, while 10-year gilt yields 0.31% to 4.202%, the lowest level seen since the end of May.
Falling yields on gilts, UK government-issued bonds, usually spell good news for mortgage payers as it makes lenders more inclined to cut their own costs for borrowing.
However, for gilt yields to fall further, interest rates will need to fall back from the 5% it currently stands at, although the market is forecasting a peak of around 6% before the end of the year.
John Higgins, chief markets economist at Capital Economics, said gilt yields and sterling may have further to fall.
"Despite today’s big reaction in markets in the UK to better-than-expected inflation news, we still think investors are overestimating the peak in interest rates there and underestimating how much monetary policy will be eased in 2024 and beyond," he wrote.
"Indeed, even though we’ve nudged up our near-term forecast for Bank Rate, we now project that the 10-year Gilt yield will fall a bit more by the end of 2023 than we previously thought. And we still expect cable to come under extra pressure, as appetite for risk wanes."