Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.
Inflation Rises to 3.1% in August, Putting Pressure on Bank of England
UK inflation has risen again, with the Consumer Prices Index (CPI) climbing to 3.1% in August, according to the Office for National Statistics (ONS). This follows rises of 2.9% in July and 2.6% in June, and comes a day before the Bank of England's Monetary Policy Committee (MPC) reveals its latest base rate decision.
What the Figures Show
On a monthly basis, the CPI increased by 0.5% in August, compared with a rise of 0.3% in August last year. Core CPI, which excludes energy, food, alcohol and tobacco, rose by 2.6% in the 12 months to August, unchanged from the 12 months to July.
The CPI including owner-occupiers' housing costs (CPIH) increased by 3.3% in the year to August, up from 3.1% in July. Core CPIH, which excludes the same categories, rose by 2.9% in the year to August, the same rate as in the year to July.
Implications for the Base Rate
The MPC's decision on the base rate will be revealed tomorrow, and Mortgage Solutions reports that today's figures may leave the committee with no option but to raise rates. The base rate was held at 3.75% at the MPC's last meeting in July, a decision upheld by a majority of 6:3, with three members voting for an increase.
Major lenders have raised rates in recent weeks, potentially anticipating a rise in interest rates.
Emma Hollingworth, chief distribution officer at LSL Financial Services, commented that while the Bank of England has held its nerve on interest rates, the inflation data has significantly raised the odds of a hike in borrowing costs this year. She noted that markets are pricing in as many as four rate rises over the next year, which has sent swap rates soaring and triggered a wave of repricing as lenders race to protect their margins. She added that brokers should reach out now to clients nearing the end of their deal.
What This Means for Letting Agents and Inventory Clerks
Rising inflation and the prospect of higher borrowing costs have direct knock-on effects for the rental market. Landlords with mortgages approaching the end of fixed deals may face increased costs, which can influence rent decisions and property sales. Letting agents and inventory clerks should be aware that continued market uncertainty may drive changes in landlord behaviour, portfolio reviews and renewed activity as borrowers and investors seek advice in choppy conditions.
Source: Mortgage Solutions