Copy article

What does the slight but surprise CPI rise mean for mortgages?

Journalist: Ruby Hinchliffe, The Telegraph

ended 17. January 2024

CPI inflation has rose by 4.0% in the 12 months to December 2023, up from 3.9% in November – and the first time the rate has increased since February 2023. 

Could this have any impact on people's mortgages and future Bank of England decisions? If so, what kind of impact could it have? Also, is the Red Sea conflict posing an additional, new threat to keeping inflation down?

9 responses from the Newspage community

Copy all

Copy

Editor
Samuel Mather-HolgateVerified
Independent Financial Adviser at Mather and Murray Financial
The inflation journey was always set to be bumpy, and the general trend is in the right direction. This slight pop in the headline rate is actually reflected in gilt rates as mortgage lenders are set to pause their price war. I expect inflation to remain around this rate for the next few months before continuing the tumble. That is when lenders will follow suit in earnest.
Copy

Editor
Stephen PerkinsVerified
Managing Director at Yellow Brick Mortgages
The slight increase in inflation revealed this morning will certainly mean a base rate hold for the short term, but it is likely a hiccup and not a trend. Lenders are unlikely to put rates up but we will probably see a cooling off of the recent rate reductions.
Copy

Editor
Riz MalikVerified
Independent Financial Adviser at R3 Wealth
Geopolitical developments have historically been a factor in rising inflation rates, and the current turmoil in the Middle East might similarly influence economic trends. This issue has been acknowledged by the Bank of England, which is likely to consider it in their upcoming discussions about the base interest rate.
Copy

Editor
Michelle LawsonVerified
Director at Lawson Financial
The small upturn in CPI, which is seasonal related, may mean the brakes are put on slighltly on the rate decreases for those lenders with tight margins but lenders want to lend so I think by and large we will see the same momentum. The Red Sea crisis is a worry as this could impact inflation further with the costs of supply increasing etc. All in all.. and what we know.. is nobody can forecast the future so we have to sit tight and see where the rollercoaster turns. Borrowers should act now and secure something as good brokers are monitoring for better products so it is a win-win for those taking action.
Copy

Editor
Andrew MontlakeVerified
Managing Director at Coreco
Todays inflation figures are a stark reminder that nothing can be taken for granted, though the small rise should be viewed as a metaphorical speed bump rather than a fundamental change of direction.

"With wage inflation starting to cool and despite the threat of other global issues, there is every expectation that the next set of data will show a return to falling inflation.

"Those in the mortgage market will be watching SWAP rates closely and it could mean a slight pause to the New Year rate wars we have seen, but competition between lenders is unlikely to wane too much.

"It is a timely reminder that it is a fools folly to try to play the market and locking into a rate early is a safer play for many.
Copy

Peter Stokes0
Director of Mortgages at Davidson Deem
The small rise in inflation surprised most economists, and the money markets. Already we are seeing a small spike in swap rates this morning, and with lenders operating on fine margins, the recent falls in fixed rates for borrowers is likely to stop. We may even see some lenders at the sharp end of pricing raise their rates slightly. Indeed this week, Co-Op Bank (who had market leading rates) have pulled their rates twice and moved them upwards, although this has more to do with servicing levels than pricing.
My advice to borrowers who need a mortgage in the coming weeks is grab a good rate quick, just in case we see a small rise . However, I do feel the in the coming months, the downward trend is likely to return.
Copy

Graham CoxVerified
Director at Bridging Hub
Much depends on how the money markets react to this uptick in inflation. If it's considered a blip, then no problem, and it's likely mortgage rates will continue to fall. But if events in the Middle East escalate and draw other countries into a regional conflict, it could get very ugly, very quickly. Such volatility would ramp up oil prices and keep interest rates higher for longer.
Copy

Charles Breen0
Founder at C B
Despite this slight blip and it is only a blip and we will see rates continue to trend downwards for borrowers. Despite this unexpected blip borrowers will see decreasing rates from lenders because as Liz Truss discovered and now the Bank of England is discovering, the bond market reigns supreme. As Ray Dalio said “The bond market is the most important market in the world,”
All this really means is that the Bank Of England will maintain its current holding pattern on rates, as they prefer inaction over being accused of being too zealous. For borrowers, we are only seeing rates continuing to trend downwards, towards the end of last year we experienced rates lenders were offering becoming uncoupled from the Bank Of England, and I think that trend will continue.
Copy

Amit PatelVerified
Adviser at Trinity Finance
The on-going turmoil in the Red Sea will have a huge impact on inflation the longer the situation continues. It will have a knock-on effect in the supply chain as cargo carriers will be re-routing there ships via the Cape of Good Hope and adding over 10 days to the journey from the Far East to Europe. These costs will be passed onto consumers. The Bank of England will be monotoring the situation very closely.