Rate rise needed to ‘keep a lid’ on rising inflation, experts warn
Mark Harris, of mortgage broker SPF Private Clients, warns there are growing fears the Bank of England will raise rates several times to keep a lid on inflation.
Interest rates will have to rise to ‘keep a lid’ on rising inflation, experts have warned.
Inflation rose to 3.1%, up from 2.9%, the Office for National Statistics has revealed. More increases are expected amid rising crude oil and petrol prices.
Mark Harris, chief executive of mortgage broker SPF Private Clients, (pictured), says: “With the consumer prices index rising above 3% in August, well ahead of the Bank’s 2% target, the chance of an interest rate rise – and more – looks increasingly likely.”
Interest rate rises
However, opinion is divided about how quickly such rate rises will begin.
The Bank of England’s rate-setters are due to announce their latest decision today.
Harris adds: “The Bank might pause a little longer until the November meeting, resulting in higher borrowing costs soon after Chancellor Healey’s first Budget.’
He continues: “Higher inflation figures are not surprising given the ongoing Middle Eastern conflict and its impact on oil and energy prices.
“Swap rates, which underpin the pricing of fixed-rate mortgages, have been volatile in recent weeks, resulting in several of the biggest lenders, including HSBC, Nationwide, Santander and Halifax raising their mortgage rates.”
There are growing fears that the Bank of England will have to raise interest rates several times to keep a lid on inflation.”
Other lenders are expected to follow suit to avoid being swamped with enquiries as borrowers search for the cheapest rates.
Harris explains: “There are growing fears that the Bank of England will have to raise interest rates several times to keep a lid on inflation, pushing up Swap rates and in turn, mortgage pricing.
Household pressures
Meanwhile, Nathan Emerson, Chief Executive of Propertymark, says: “The year to date has been a considerable rollercoaster for many households, with rising costs putting increasing pressure on household finances.
“Consumers have rightly shown caution around longer-term, high-value borrowing, with the impact being felt across the housing market.
“With inflation tracking upwards, tomorrow’s Bank Rate decision will be closely watched and could have a direct impact on the housing market as we head towards the Autumn Budget.
“The housing market remains finely balanced, with key factors such as higher food and energy costs continuing to weigh on consumer confidence and ongoing affordability.”
