Markets are forecasting that rate rises may now rise from 4.5 per cent to above 5 per cent later this year – with some suggesting they could get close to 5.5 per cent.
If those on standard variable rate mortgages were to see a rise of one percentage point added on to their deal, they could see monthly repayments increase by more than £1,800 per year,Some specialist buy-to-let lenders – Mortgage Works, Paragon and Kent Reliance – said they would increase rates for fixed-rate mortgages soon after the inflation figures were announced. They haven’t said how much by, but industry sources have said it’s likely to be up to 0.5 per cent.
“We are likely to see other bigger lenders follow suit soon,” said Andrew Montlake, managing director at Coreco mortgage brokerage. Barclays boss CS Venkatakrishnan warned that UK mortgage holders faced a “huge income shock” with borrowers spending up to 30 per cent of their income on servicing their mortgages.
Mr Hunt said his inflation target was “absolutely deliverable”, but added: “We have to stick to the plan and we have to recognise that this is not going to be easy and we have to strain every sinew to make sure we deliver it.” He said: “We’ve been talking to the supermarkets, to the farmers, looking at every element of the supply chain and what we can do to pass on some of the reductions in costs that are now beginning to come through to consumers as quickly as we can.”