As inflation is now below the Bank of England’s 2% target, it paves the way for further interest rate cuts.
That would make borrowing money less expensive, but could mean lower returns for savers.
Analysts say there is now a greater likelihood of an interest rate cut by the Bank in December, after a widely expected reduction from the current level of 5% in November.
That could give mortgage lenders more confidence to reduce the interest they charge on new fixed-rate home loans.
Many people face higher monthly repayments, as rates are higher than many were accustomed to for a decade.
Separate official figures show that people who are renting a home are paying 8.4% more than a year ago, external – displaying the continued financial squeeze on tenants.
There remains some nervousness among borrowers and consumers in general about what will happen in the Budget, announced by Chancellor Rachel Reeves on 30 October.
Government sources have told the BBC that she is looking to make tax rises and spending cuts to the value of £40bn.
Lower inflation can help or hinder the government – for example, with a lower benefit bill, but it could also gather less in tax as a result.
