CPI spikes to 3.5%: Mortgage rates have fallen as far as they can ‘and may even creep up’

We expected a jump, but what we got was a leap – in both headline and core inflation.

The surge in inflationary pressure won’t just translate into a slowdown in base rate cuts. We’re in ‘handbrake on’ territory.

The prospect of the Bank of England reducing its Base Rate again in June has shifted from slim to non-existent.

With the economy starting to expand at a decent clip, the Bank is now less concerned about stimulating growth. Getting inflation under control, and forcing it back down towards its 2% CPI target, is once again the Bank’s top priority.

It will have its work cut out, as there are some worrying trends below the surface of today’s inflationary numbers. And while a number of temporary factors make April’s spike look particularly bad, no-one should expect inflation to return to target by itself.

The swaps market – which determines mortgage interest rates – had already been pricing in a jump in inflation today and a delay in the next Base Rate cut.

But with Britain’s inflationary problem back with such vengeance, the odds on a Base Rate cut in August have lengthened too. The path towards lower interest rates will be longer and slower than thought as recently as just a few weeks ago.

For anyone planning to buy their first home or remortgage this summer, today’s inflation data will come as a blow.

oFr now, mortgage rates have fallen as far as they can and we may even see them creep up over the next few weeks as lenders recalibrate their pricing in response to rising swap rates.