Mortgage borrowers are already feeling the pressure from this month’s 0.5% hike in interest rates, which the Bank of England (BoE) put in place in an attempt to curb soaring inflation.
But data this morning revealing inflation, as measured by the Consumer Prices Index (CPI), had risen by 10.1% in a year, may well provide further impetus for the BoE to push rates up further.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “These figures are likely to fuel speculation of another 0.5% interest rate rise next month, piling pressure on borrowers.
“The Bank is trying to bring core inflation down – a measure that strips out energy and food prices which are at the mercy of global markets.”
Adrian Lowery, financial analyst at UK wealth manager Evelyn Partners, agreed. He said: “With inflation, bad news is bad news, and this reading makes another 0.5% base rate hike a consideration for the Bank of England at its next monetary policy committee on 15 September.
“The increasing cost of servicing mortgage debt is inflicting something of a double-whammy for homeowners, and particularly those with larger loans that are coming up for renegotiation in the coming year.”
What should mortgage borrowers do now?
For anyone who is able to switch their mortgage deal, the advice is to lock into a fixed rate deal as, although rates have been rising since December, they still remain relatively low compared to historic figures.
Adrian said some lenders may now consider withdrawing their best rates as a result of this inflation data in order to ‘get ahead of the BoE curve’.
“No bank or building society wants to be left offering the best deals on the market, which risks them getting flooded with applications – in a sort of ‘devil takes the hindmost’ game,” he said.
He advised taking the following steps.
- First check when your current deal expires – if it’s inside of six months, make an appointment with your lender or broker.
- Next, you should prepare by getting all our documents – payslips, bank statements etc – in order and ready to ensure you can apply swiftly for any deals which are offered before they are taken off the market.
Adrian added: “Mortgage applications always tend to involve more steps and time than anticipated, and watching the lowest rates being taken off the table can be frustrating, so being well prepared is essential. It’s in situations like these that a good mortgage broker will earn their fee.”
