Inflation hits 7%

"Inflation hitting 7% will have lenders and borrowers alike on red alert for further interest rate rises. Mortgage rates tend to move in expectation of base rate hikes, so if this inflation stokes expectations of an imminent base rate rise, mortgage rates could rise within days."

"As bad as it is, inflation at 7% doesn't reflect the rise in energy prices so we are going to see it rise further in the coming months. It's very likely that the Bank of England will raise the base rate further as it's a blunt tool to curb spending. That will cause variable rate mortgages to rise and fixed rates will be adjusted at the same time. We are in for a couple of very challenging and painful years ahead."

"I believe we are heading for a recession that will knock the socks off the last one. Another interest rate rise, and soon, is inevitable and will leave the poor people of Britain struggling even more. And the worst is yet to come. For those due to remortgage soon, don’t delay. My advice is to speak to your broker as soon as possible and secure a longer term fixed rate now while you can to ride out the mortgage market storm that is brewing."

"The consensus amongst economists was for 6.8% inflation in March, so 7% could force the Bank of England to hike interest rates faster and harder. We could even see a 0.5% base rate increase at the next Monetary Policy Committee meeting. Lenders are already tightening their mortgage affordability assessments, and April has seen increases to the energy cap, national Insurance and dividend tax. With the days of ultra-low mortgage rates seemingly numbered, house prices could fall later this year."

"Unfortunately, we are presently suffering from cost-push inflation as a result of the increase in energy prices, and the rising costs of materials and food. It's eroding the value of money and needs to be tamed by the Bank of England. If they don't address the relative ease at which money is borrowed either by restricting lending, forcing rates to increase (and hopefully causing people to think twice about borrowing) or forcing banks to require larger deposits, the problem will be exacerbated as property investors will become imprisoned by payments they can't afford due to underlying tenants that can't keep up themselves. The only way out of this is to increase savings and the banks themselves need to help by raising their rates to induce savings."

"This is a massive concern for the mortgage market as there is a real risk of existing borrowers struggling to maintain their payments on higher interest rates. Lots of borrowers have borrowed to their maximum capacity on the lowest rates in history so despite the fact lenders stress test their maximum borrowing limits, the reality is many will struggle with the increased payments and the impact of higher living costs."