Hike rates

BoE forecasts 1% rate hike in November

The Bank of England is under more pressure to raise interest rates after inflation rose 10.1% in September.

The return to double-digit inflation, following a 9.9% rise in August, will deal a further blow to households already feeling the effects of rising mortgage rates and rising oil prices. energy.

Sarah Coles, Senior Personal Finance Analyst, Hargreaves Lansdown, said: “Inflation is back in double digits, rising to nearly twice the wage rate and pushing us all to breaking point.

“Those on the lowest incomes are waiting in limbo to see if their benefits will get the boost they need to prevent their finances from crashing off the edge of a cliff.

“Meanwhile, those on average incomes face an increasingly impossible challenge every month to make ends meet, and anyone with savings is watching inflation eat up their living money. Fortunately, for savers at least , there is more positive news.

What does rising inflation mean for mortgage borrowers?

The rise in inflation, as measured by the consumer price index (CPI), comes after a turbulent month for mortgage borrowers.

The government’s mini-budget urging lenders to raise rates has also increased the chances of the Bank of England (BoE) raising interest rates in the future. Some experts thought it could reach 6% next year.

The BoE’s inflation target is 2% and it is gradually raising the base rate in an attempt to bring the figure back to that baseline.

Dominik Lipnicki, director of Your Mortgage Decisions Ltd, said: “The higher than expected inflation figures are gloomier and bleaker for borrowers as the Bank of England comes under even more pressure to raise its base rate. when its monetary policy committee meets. November 3.

“That said, there are no winners here as even savers are hiding for nothing given the level of inflation.”

Meanwhile, Alice Haine, personal finance analyst at Bestinvest, said new Chancellor Jeremy Hunt’s decision to tear up the mini budget could reduce the volatility observed on the financial markets in recent weeks, but this would not alleviate the pressure on household budgets.

She said: “While the government’s decision to scrap its controversial budget plan means the Bank of England is now under less pressure to aggressively tackle inflation, it is still expected to press ahead with a base rate hike of at least 1% when the monetary policy committee next meets on Nov. 3 and will work to bring double-digit price increases closer to its 2% target.

“It will offer little relief to homeowners who are still struggling with a very difficult mortgage market.

“Hunt’s decision to rip up the mini-budget may have eased mortgage panic to some degree – a worrying feature of recent weeks as lenders pulled more than 1,700 products and backtracked on face deals. to soaring borrowing costs – but it hasn’t quite stifled.