There is set to be more pain for homeowners after experts warned a higher-than-expected inflation figure this morning would “hold back” the chance of mortgage rate cuts.Services inflation, which the Bank of England is watching carefully for signs of domestic pressures, only fell from 5.9 per cent to six per cent. This was much higher than the 5.5 per cent predicted.
He and the Chancellor Jeremy Hunt are banking on an improving economy to turn around Tory fortunes ahead of an election, expected in October or November. Key to that would be an interest rates cut in time for the effect to filter through into people’s pockets. As well as having an effect on tracker and variable mortgages, which tend to follow the base rate, brokers said that this will have an impact on fixed-rate mortgages too.
“A big fall in inflation was already expected and therefore already priced into fixed rates. Mortgage borrowers may have to wait a little longer for the base rate to fall and the recent ups and downs in mortgage rates should underline the ongoing uncertainty.” “It’s important to stress that until an official bank rate cut occurs, any declines in fixed rates will be gradual and steady, rather than the rapid weekly decreases seen earlier this year, as swaps have remained settled based on initial market reactions.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “It feels like this should be a healthy dose of good news, but anyone with a mortgage will be sickened to hear it’s not as good as it seems. For anyone on a variable rate mortgage, nothing will change until we get rate cuts, and the timing of those still hangs in the balance. We can’t completely rule out a June rate cut, but it looks distinctly like there are still a few months before your mortgage bills drop.