Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Strategy. Read the original article for full details.
CPI inflation rise could push mortgage rates higher, experts warn
UK inflation rose in the 12 months to August, with the Office for National Statistics (ONS) reporting consumer price index (CPI) inflation of 3.1%, up from the previous month's 2.9%. Homeloan experts say the rise may mean higher mortgage rates as markets take fright.
Mortgage experts said lenders had already priced in the anticipated August rise in CPI, but warned that further higher-than-expected inflation could spook markets and lead to more rate hikes.
Markets sensitive to inflation signals
L&C associate director David Hollingworth said the rate of inflation was expected to rise in August, so the figures would have been anticipated by the market. He noted that markets are becoming increasingly sensitive to signs that inflation could prove more stubborn than expected, particularly given ongoing geopolitical uncertainty and higher fuel and energy prices.
According to Hollingworth, homeowners have had to come to terms with higher mortgage rates and a less favourable mortgage market than just a few months ago. He warned that jittery markets could mean further tremors for mortgage rates, and that several lenders are already hiking rates for the second time in as many weeks. Borrowers should expect mortgage rates to remain under upward pressure in the near term.
Energy prices and the rate outlook
Carl Parker, national director at Just Mortgages, said inflation rising again came as little surprise as the shock to energy supply continues to push up prices. He observed that GDP has remained resilient in the face of such volatility, but the longer-term picture is likely to be less positive, particularly as the Iran conflict rages on and oil prices climb in response.
Parker said he was not expecting the figures to be enough yet to force the hand of the MPC, with another hold still the likely outcome at its meeting the following day. However, he said the market has to prepare for a rate rise in the near future if inflation accelerates further.
What this means for the rental sector
For letting agents and inventory clerks, the outlook matters indirectly: landlords coming to the end of fixed deals face a mortgage market under upward pressure, which can affect rental market conditions and landlord decision-making. Agents should be aware that several lenders are already raising rates, and that further hikes are possible if inflation proves more stubborn than expected.
Source: Mortgage Strategy