EXPERTS: Inflation rise to delay interest rate cut until August

Landlords could face higher mortgage rates for longer after inflation jumped by more than expected last month to 3.5%.

The rise is the highest rate in more than a year, driven by higher energy costs, water bills and airfares, according to the latest ONS figures.

Jeni Browne (pictured), business development director at MFB, says the news won’t halt interest rate cuts, although it could mean a delay in the next cut. “There were strong predictions for another 0.25% in June, but these latest figures may push that until August,” she tells LandlordZONE.

Peter Stimson, director of mortgages at the lender MPowered, says the swaps market - which determines mortgage interest rates - had already been pricing in a jump in inflation and a delay in the next base rate cut, but with Britain’s inflationary problem back with such vengeance, he agrees the odds on a cut in August have lengthened too.

Blow

“For anyone planning to buy their first home or remortgage this summer, today’s inflation data will come as a blow,” says Stimson. “For now, mortgage rates have fallen as far as they can, and we may even see them creep up over the next few weeks as lenders recalibrate their pricing in response to rising swap rates.”

MFB’s Brown says the money markets are still very volatile due to multiple national and international economic and geopolitical disruptions and reckons this will likely continue for the next few years.

“The best thing investors can do is lock rates in as early as they can,” she advises landlords. “Speak to your broker to ensure the lender will allow you to switch to a cheaper rate before completion where possible, but ultimately, securing rates early will protect you from unexpected market increases.”