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Categories: government and politics | prs
UK inflation has risen from 2.5% to 3%. After this was announced, lenders have been withdrawing some of their lower rate mortgage products from the market.
While certain low rate products may be momentarily slipping away, some experts believe that mortgage rates are unlikely to rise too much, unless there are other sudden inflation hikes.
What has caused inflation to rise?
The movement of inflation is decided by many complex factors.
The Office for National Statistics (ONS) primarily base their inflation calculations on the changing prices of various common goods in a “virtual shopping basket”. Products are occasionally sifted in and out so that they can ascertain the most accurate picture of the situation.
Prices are often influenced by big shifts in the geopolitical landscape, which often make it more difficult and expensive for sellers to source the products they need.
In recent years, many events have impacted the UK economy: the coronavirus pandemic torpedoed entire sectors, international wars caused oil and energy prices to soar, and a divisive Tory mini budget in September 2022 prompted the Bank of England to take action in the name of ensuring financial stability.
There’s little sign that this barrage of big changes will slow down. Now, there is uncertainty surrounding the impact of Donald Trump’s second presidency.
In response to the US increasing trade tariffs, EU states are launching their own retaliatory tariffs, which may be one factor that leads to inflation increasing further.
Research of the UK economy by Deutsche Bank has concluded that inflation rising to 4% or higher as early as this summer is a distinct possibility.
Similarly, former MPC member Andrew Sentance commented that financial markets will have to “digest the prospect” of this happening.
Bank of England dilemmas
The main concern of the Bank of England (BoE) has been to steadily bring the Base Rate down and meet a 2% target for inflation. Their aim is to nurture growth and employment.
Earlier in February, the BoE’s Monetary Policy Committee (MPC) voted to cut the Base Rate to 4.5%. Until recently, the BoE’s cautious disinflation strategy appeared to be working.
It was anticipated that further cuts were in store for the remainder of 2025, but this unexpected inflation increase – certainly unwelcomed by the BoE – may lead to a change of plans on this front.
Economists are now predicting that the MPC may decide to hold the Base Rate at its current level in their next meeting. This may help to reduce the risk of destabilising inflation.
International politics
On the other side of the Atlantic Ocean, Donald Trump’s re-ascension to the Oval Office has continued to make waves across the global economy.
In response to the US increasing international trading tariffs, the European Commission have promised immediate retaliation by increasing their own tariffs.
Trump’s “America First” policies have been labelled protectionist, which leaves the ‘special relationship’ between the US and UK in a precarious position.
As close allies, there is always the possibility for some special exemptions to be made for the UK in Trump’s trade war. But if there are none, there is potential risk to the UK economy. The housing market could be affected in turn, but to what extent is unknown as of yet.
Private landlords can still capitalise
Now is the time to net a great deal, while current lower rate products are still accessible.
By getting in touch with an expert mortgage advisor, you can secure the best product that suits your needs.
To explore the options that are currently available, call our team today or request a callback.
