Inflation and your business

For a small mortgage business, rising inflation is felt from both directions. Our own operating costs increase, but more importantly, clients have less disposable income and can become more cautious about making big financial decisions.
I’m concerned about inflation remaining stubborn because it could slow the pace of future interest-rate cuts. However, borrowers shouldn’t assume that higher inflation automatically means higher mortgage rates, as fixed rates are also driven by swap rates and lender funding costs.
The biggest challenge for businesses and households alike is uncertainty. People can budget for higher costs, but it’s much harder to plan when they don’t know what those costs will look like six months from now.

A modest increase such as this isn't too concerning, but any rise in inflation potentially puts pressure on business margins.

We will no doubt see our office energy bills rise, along with other costs, and by the end of the year staff will naturally expect an appropriate pay rise as their own living costs increase.

We run a very tight ship in terms of costs, but ultimately every increase has to be absorbed somewhere. Businesses either have to become more efficient, grow revenues or find ways of recovering some of those additional costs. Otherwise, higher inflation simply feeds through into lower profitability.

For a property platform, inflation does not really bite through our own bills. It bites through the housing market. Sticky inflation keeps interest rates higher for longer, which is why the Bank keeps holding rates steady rather than cutting. Higher-for-longer is what keeps buyers sitting on their hands: RICS has new buyer enquiries at a net -28%, and Zoopla has sales agreed running 9% below last year. Fewer moves is what a property business actually feels, long before it shows up in our overheads.

There is a flip side worth saying, though. A cautious, cash-conscious market is exactly when getting the asking price right matters most. In a hot market, momentum forgives an overvaluation. In this one, an overpriced home simply sits, and every week it sits costs the seller. So my real concern is not our costs. It is whether sellers price with confidence in a market that punishes the wrong number.