Borrowers will be “looking back in anger”, brokers say, as inflation rises to 3.8% following "Oasis bump"

Borrowers will be “looking back in anger”, brokers have said as inflation rose to 3.8% in the 12 months to July, potentially impacted by the Oasis bump. They say mortgage rates are likely to edge up again in the days and weeks ahead as the chances of another rate cut this year by the Bank of England become “increasingly remote” – and urged borrowers to secure their new rates soon.

Katy Eatenton, Mortgage & Protection Specialist at St Albans-based Lifetime Wealth Management, said: "Inflation has shot up again, with some saying the "Oasis bump" is to blame. Borrowers will certainly be looking back in anger. This is not good news for mortgage rates and the rate cuts we have had in recent weeks may soon be reversed. If you're approaching the end of your mortgage, try to lock in as soon as possible as lenders could start to increase rates in the days and weeks ahead."

Emma Jones, Managing Director at Runcorn-based Whenthebanksaysno.co.uk, agreed: “We've seen some welcome cuts from lenders in recent weeks but the direction of travel now looks set to reverse. This rise in inflation is a blow to borrowers and rates may well start to edge up again. The chances of another rate cut this year are looking increasingly remote.”

Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, cautioned: “Any indication of inflation rising will typically push mortgage rates a little higher, but with the recent base rate cut it’s a difficult position for the money markets to be in. Don’t be surprised if we see the cost of mortgages creep up again this year. Secure your new deals as soon as you can as the summer sizzlers could be gone before you know it."

Ranald Mitchell, Director at Norwich-based Charwin Mortgages, said inflation has derailed borrowers' dreams: “Mortgage rate hopes have been smashed, as inflation bites back. With CPI jumping to 3.8% and services inflation hitting 5%, the Bank of England has no choice but to hit pause on further rate cuts.

"To their credit, lenders have been keeping the market competitive and passing on reductions where possible, but stubborn inflation means they can only go so far. For millions of homeowners, that means remortgage deals won’t be getting much cheaper anytime soon.

"First-time buyers hoping for relief will also be left disappointed, as affordability tests stay tough. The dream of falling mortgage rates and a more accessible mortgage market has just been derailed by inflation.”

Jack Tutton, Director at Fareham-based SJ Mortgages, added: “These inflation figures might just see lenders increase their rates again. The cost of borrowing for lenders has been creeping up since the Bank of England's double vote, and the further increase in inflation today is likely to increase them further.

"This will leave lenders little choice but to consider reviewing their products. Should inflation continue on its current path, it's hard to see any further base rate cuts this year.”

Craig Fish, Director at London-based Lodestone Mortgages, said rate cuts look set to disappear: “The cuts that we’ve seen lately could very quickly vanish on the back of this inflation data, which paints a very bleak picture of the state of the UK economy. Don’t expect the Bank of England to come to the rescue either. This mess needs more than sticking plasters, it needs a transplant, namely a change at the top.”