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"Higher than projected inflation figures are not a good sign for mortgage holders"

ended 19. February 2025

The chances of a rate cut by the Bank of England next month have fallen on the financial markets following inflation rising more than expected, to 3%. Though more cuts are expected in 2025, Newspage asked brokers and property market experts whether this could  slow the mortgage rate cuts we have seen over the past fortnight or so — and for their advice to borrowers.

10 responses from the Newspage community

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David Stirling
Independent Financial Adviser at Mint Wealth
The economic landscape of 2025 is set to be a delicate balancing act, as interest rate cuts and persistent inflation present a challenging environment for borrowers. While anticipated rate reductions from the Bank of England were never expected to occur monthly, they are more likely to unfold gradually over the year on a quarterly basis. With inflation currently at 3%, the timeline for the next rate cut may have been pushed further into the future. Borrowers would be wise to secure the most competitive fixed-rate deals available now. A proficient broker can help monitor market shifts and, if advantageous, facilitate transitions to better rates as they arise. Additionally, borrowers should consider tracker mortgages that come without early repayment charges, as these offer a potential escape from high standard variable rates, with the flexibility to adjust if market conditions change.
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Elliott Culley
Director at Switch Mortgage Finance
Higher than projected inflation figures are not a good sign for mortgage holders as it's likely this will lead to an initial rise in mortgage rates. Couple this with high wage growth and the Bank of England are likely to change stance and delay any further base rate cuts until later in the year.
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Mark Eaton
COO at April Mortgages
A resurgence in inflation is a reminder that the Bank of England is walking a tightrope when it comes to managing interest rates. There has been talk of further rate cuts this year, but those predictions feel premature with prices now rising more quickly. The Bank is forecasting that inflation will peak at 3.7% this year provided core inflation, which strips out volatile goods and services such as food and energy, remains stable. While the Bank is optimistic that it will fall back to 2% shortly after this, it may be wary of cutting rates too soon and will need to adapt quickly in response to global events. For borrowers, rising living costs will put further pressure on already stretched incomes and compound the affordability challenge impacting buyers across the country, particularly those trying to get a foot on the ladder. Access to larger loan amounts via modern 10 year fixed rate products won’t fix the problem but they could help borrowers overcome these hurdles.
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Chris Barry
Director at Thomas Legal
Inflation was always going to tick up again given the Chancellor hasn’t got a handle on the parts of the economy she can control and instead relies on the areas outside of her control. Mortgage rates are unlikely to go up because the country isn’t growing, however we are likely to see rates reduce more slowly. Reactive as ever.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Looking at market movements, some of the reductions might be repriced soon. There is still this expectation that mortgage rates are going to tumble down in 2025 and there is nothing to suggest that is the case. Maybe that’s wishful thinking for the latest set of mortgage clients coming off mortgage deals starting with a 1. One deal on my desk has a borrower's payments going up by over £800 per month. That’s a hard pill for anyone to swallow.
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Justin Moy
Managing Director at EHF Mortgages
Any thoughts of further mortgage cuts can be extinguished by this news today, but this increase is unlikely to make a huge change to current pricing given the slowdown in the economy. Just the rate of change will slow.
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Michelle Lawson
Director at Lawson Financial
Another disastrous outcome for Rachel ‘Tax’ Thieves where the budget is now turning into the worst play, a tragedy. She needs to get a grip on what she is doing, and quickly before history repeats itself yet again.
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Ken James
Director at Contractor Mortgage Services
With uncertainty lurking behind every street corner it is a worry that inflation figures have started to head north again. Further base rate cuts may still happen, but every piece of economic data that comes out recently makes it harder for the MPC to make that cut sooner rather than later.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
With inflation increasing above expectations the Bank of England will have to cool their jets on further rate cuts especially as the most inflationary impacts from the budget not hitting until April. The mortgage rate war it appears may have been more of a skirmish.
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Jack Tutton
Director at SJ Mortgages
Such a jump in inflation will kill any chances of a further base rate cut next month, providing Februarys inflation figures remain similar. The markets had forecasted that inflation may increase to around 2.8% for January, the fact that its increased well over this will be concerning and is likely to put a hault on lenders cutting their rates. This will cause more concerns to mortgage holders as many have been expecting rates to continue to fall this year.