This is the highest level to which inflation risen in 40 years and provides official confirmation of what consumers have been noticing in their day-to-day finances– that the cost of living is soaring.
Inflation is calculated by the Office for National Statistics, which analyses the average rate at which the price a ‘basket of goods’ has risen over the last year.
The increasing cost of food and transport as well as escalating prices of household energy bills have contributed to the annual 9% rise in the Consumer Price Index – up from 7% in March.
How will inflation impact my mortgage?
For anyone with a mortgage, today’s news could have an impact on your repayments. Experts have said the Bank of England’s Monetary Policy Committee is now more likely to lift the base rate in June as they attempt to curb inflation.
It has already raised the rate in four consecutive meetings, but with inflation now reaching a 40-year high, there will be more pressure on them to hike rates.
Simon Webb, MD of capital markets and finance at LiveMore, an interest-only mortgage lender for people aged 50 to 90+, was among those predicting another rate rise. He thinks it could increase next month by a further 0.5%.
“This was the preferred option of three of the nine MPC members at their last meeting in early May,” he explained.
“That will be a real blow for mortgage borrowers on variable rates whose monthly payments have potentially already gone up four times in five months.”
What effects will inflation have on the housing market?
The rising cost of living has not yet had an impact on house prices, which have been growing in double digit figures for months. However, government data for March indicate things may now be slowing.
The average house price in the UK increased by 9.8% in March, which is less than the 11.3% in February. Experts believe this could indicate the cost-of-living crisis was starting to impact people’s appetite for moving.
Karen Noye, mortgage expert at Quilter, said: “With inflation now sitting at 9% as of this morning and people suffering with the worst food and energy price hikes for decades it is likely that house prices will continue to drop.
“However, whether they drop low enough to make the prospect of homeownership a remote possibility for ‘generation rent’ still remains unlikely.”
What can I do to protect my mortgage?
Mortgage brokers are advising anyone with a deal about to expire in the next six months to try and secure a new fixed-rate as soon as possible, before more interest rates increase.
You can find more advice about this here and here.
Meanwhile, Simon Webb added: “Now is the perfect time for borrowers to lock into a long-term fixed rate mortgage and this will be especially advantageous for borrowers aged 50 to 90+.”
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