Rates are unlikely to be cut tomorrow despite inflation at 3.8%, mortgage experts predict.
The consumer price index (CPI), which measures the increase in the cost of goods and services over the past year, may not have risen higher in August than it did in July. But this still means households are spending 3.8% more on many items this year than in the same period in 2024.
So there remains a lot of pressure on our finances.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partnerssaid it provided little relief for cash-strapped households still struggling with overstretched budgets.
She said: “Continued inflation is also unwelcome news for Chancellor Rachel Reeves as she prepares for her autumn budget.”
Haine added: “With inflation remaining at almost double the Bank of England’s 2% target, this may prompt a more cautious attitude to further rate cuts.”
The BoE will announce its next interest rate decision tomorrow. And most experts agree that they will likely keep them on hold rather than push them back further.
David Hollingworth, Deputy Director at L&C Mortgages said: “Inflation was expected to remain unchanged, so holding at 3.8% has followed the forecast. As a result, there is unlikely to be a significant shift in market interest rates that could impact mortgage borrowers.
“It won’t change what we can expect from tomorrow’s base rate decision, which will be a hold-on favourite.”
Meanwhile, Craig Fish, director of London-based Lodestone Mortgagesspeaking to the Newspage agency, said he thought lenders would remain cautious.
“Don’t be lulled into thinking that current inflation rates mean the cost of living crisis is easing,” he warned. “While the CPI has remained stable at 3.8%, daily life still feels more expensive for most households.
“Borrowers should not expect an immediate decline in mortgage rates as lenders will remain cautious until they see consistent evidence of inflation cooling. As for the real estate market, demand is likely to remain resilient due to a shortage of homes for sale, but higher borrowing costs will continue to act as a handbrake on activity.”
Hollingworth agreed that interest rates won’t start falling until a “sustainable path” for inflation is clear.
He added: “It is expected that inflation could rise further before easing, so borrowers will have to wait for signs of improvement before they can hope for a return to inflation. interest rate reduction.
“Mortgage rates have been rising in recent weeks as the ‘higher for longer’ interest rate outlook has taken a toll on lenders’ funding. While that hasn’t sent rates soaring, it’s certainly forcing borrowers to make quicker decisions and act quickly to secure a deal.”