People looking to buy a house are being warned that today’s inflation figures could cause mortgage rate cuts to “slow further” or it could “reverse in some cases.”
Mortgage rates have started to move in a positive direction, but several mortgage experts are warning progress could be stalled.
David Hollingworth, associate director at L&C Mortgages, said: “Mortgage borrowers have been enjoying a market where rates have been dropping. Fixed rates have been pricing in the recent and future cuts, so have been edging down with a host of deals now below 4%.
Those reductions have tended to come in small increments, but we could see that slow further or even reverse in some cases if the market reacts badly to the threat of higher inflation than was previously expected.
Borrowers holding out for more cuts may want to keep close tabs on mortgage rates. It’s far from doom and gloom but securing a rate now will protect against any turnaround but still allow a further review before completion, if there are further improvements.”
Peter Stimson, Director of Mortgages at the lender MPowered, said, “This latest jump in inflation will slam the door on the prospect of any meaningful reduction in mortgage interest rates in the coming weeks.
“Inflation is back with a vengeance and the Bank of England’s prediction that CPI will hit 4% in September, which caused gasps when it was made less than a fortnight ago, now looks almost rose-tinted.
“At 3.8% a year, prices are now rising at nearly double the Bank’s 2% target, and this will force the Bank to rein in consumer spending by delaying any further reductions to the base rate. Hopes of another base rate cut this year now look decidedly optimistic.
“The mortgage swaps market, which tracks interest rate expectations and is used by mortgage lenders to determine the fixed interest rates they offer to borrowers, had been suggesting that the next base rate cut might come in November.
“But today’s painful jump in inflation means that base rate cut may now be pushed back into 2026, and as a result we are unlikely to see any further rate cuts from lenders in the immediate term.
“Competition between lenders is intense but mortgage rates may well have fallen as far as they can for now. They may even creep up over the next month or so as lenders recalibrate in response to rising swap rates.”
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