Editor's note: This brief was summarised by The Property AI Newsroom from a report by The Negotiator. Read the original article for full details.
Rate rises needed to 'keep a lid' on inflation, experts warn
Inflation rose to 3.1%, up from 2.9%, according to the Office for National Statistics, and experts have warned that interest rates will have to rise to 'keep a lid' on rising inflation. More increases are expected amid rising crude oil and petrol prices.
Mortgage rates under pressure
Mark Harris, chief executive of mortgage broker SPF Private Clients, said that with the consumer prices index rising above 3% in August, well ahead of the Bank of England's 2% target, the chance of an interest rate rise, and more, looks increasingly likely. He noted that the Bank might pause a little longer until the November meeting, resulting in higher borrowing costs soon after the Chancellor's first Budget.
Harris also pointed to the ongoing Middle Eastern conflict and its impact on oil and energy prices as a reason why higher inflation figures are not surprising. Swap rates, which underpin the pricing of fixed-rate mortgages, have been volatile in recent weeks, and several of the biggest lenders, including HSBC, Nationwide, Santander and Halifax, have raised their mortgage rates. Other lenders are expected to follow suit to avoid being swamped with enquiries as borrowers search for the cheapest rates.
There are growing fears, Harris said, that the Bank of England will have to raise interest rates several times to keep a lid on inflation, pushing up swap rates and, in turn, mortgage pricing.
Household pressures
Nathan Emerson, Chief Executive of Propertymark, said the year to date has been difficult for many households, with rising costs putting increasing pressure on household finances. He noted that consumers have shown caution around longer-term, high-value borrowing, with the impact being felt across the housing market.
Emerson said the housing market remains finely balanced, with higher food and energy costs continuing to weigh on consumer confidence and ongoing affordability.
What this means for agents
With the Bank of England's rate-setters due to announce their latest decision, and the Autumn Budget approaching, letting agents and inventory clerks should be aware that borrowing costs and affordability pressures remain key factors shaping the housing market. The Bank Rate decision is being closely watched and could have a direct impact on the housing market heading towards the Budget.
Source: The Negotiator