Inflation remained at 6.7% in the 12 months to September, according to latest ONS data, leaving the Bank of England’s next interest rate decision hanging in the balance. Recent weeks have seen several lenders reduce their mortgage rates, after interest rates were held at 5.25% in September following a series of increases aimed at dampening inflation. It was hoped that the latest numbers from the Office for National Statistics (ONS) would show a slight fall in the rate at which living costs are increasing, but instead the overall rate of inflation remained unchanged at 6.7%. Whilst food prices fell, petrol and diesel costs increased as global oil prices rose. This has triggered uncertainty over whether interest rates may need to rise again to try to bring inflation closer to the government’s 2% target. However, core inflation, which removes more volatile items such as food and energy, saw a slight reduction from 6.2% to 6.1%.
What does this mean for your mortgage?
Lenders have cut their mortgage rates on almost a weekly basis lately, with some commentators speculating that rates may still have further to fall. However, it’s possible that the recent spate of reductions may well ease off a little following the latest inflation figures. Swap rates, which are the rates that lenders must pay other financial institutions to acquire fixed funding for a set term, and which are closely linked to fixed mortgage rates, have already started to edge up this week, suggesting we’re unlikely to see much further repricing of fixed rates downwards. While borrowers might be tempted to keep holding off making mortgage decisions, this month’s inflation data and swap rates means it’s by no means a foregone conclusion that base rate will be held, or that fixed rates will keep on falling despite the competitive market. If your current mortgage deal is due to finish in the next few months, you may therefore want to act now if you find a competitive deal. You can then review this decision again nearer the time if more competitive rates become available.
