Inflation spike means ‘prospect of cheaper mortgages off the table for now’

This is not the Christmas present the Bank of England wanted.

Inflation is surging deeper into warning territory and the Bank’s efforts to hold CPI at 2% are unravelling fast.

Optimists will cling to the idea that November’s surge in inflation was widely expected, and is partly the fault of a one-off jump in energy bills.

But no-one should expect the rising inflationary pressure to ease on its own. Core inflation, which strips out volatile factors like energy and food costs, continues to ratchet up and now stands at 3.5%.

Separate data published by the ONS yesterday showed wage inflation is rising for the first time in a year, which will also feed into consumer inflation in coming months.

In response the Bank of England’s approach to interest rates will need to be far more hawkish than many had hoped.

The next reduction in the Bank’s base rate – which the markets had expected to be in early 2025 – may now come later.

This will be a worry for anyone planning to buy their first home or remortgage in the New Year. While mortgage lenders will try to trim their interest rates in January in an effort to win borrowers’ business, their ability to do so will now be severely constrained.

The Bank of England’s battle against inflation is back on and the prospect of cheaper mortgages is off the table for now.