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Category: buy to let mortgages
Economic forecasters predict that the recent inflation increases are only the beginning, while mortgage rates are not crashing down any time soon.
UK inflation rose sharply to 2.3% in October following energy pricing hikes, straying above the Bank of England’s target level of 2%.
After a three-year low of 1.7% in September, this was a shock to the system and may have charted a new course for further inflation increases.
Sarah Coles, head of personal finance at Hargreaves Lansdown, has discussed the clear possibility that inflation is set to get worse before it gets better.
This month’s unwelcome return above the inflation target is unlikely to be a one-off: inflationary pressures look set to keep prices rising more quickly.
The good news is that public sector pay rises and the rise in the minimum wage should help ease the immediate pain of higher prices for some people. The bad news is that this could end up feeding into higher prices further down the line, spurring another round of inflation.
Retailers are also warning that higher National Insurance could power price rises, and with inflationary pressure building, rate cuts might be off the agenda for a while yet.
The fact that core inflation rose again, from 3.2% to 3.3%, indicates that rising energy prices aren’t the only issue. Even when they’re stripped out, prices are on the up. Meanwhile, higher services inflation could be the canary in the coal mine of the impact that higher wages could end up having on inflation more broadly.
The next Base Rate cut is scheduled for 19th December 2024 by the Bank of England, though there will be more updates on inflation before then.
Remortgaging is the way forward
Some private landlords have delayed remortgaging plans under the assumption that rates will drop in reaction to the previous Base Rate cuts.
However, these big rate drops have not materialised. On the contrary, mortgage product ranges have been withdrawn and rates increased in lots of instances.
Lenders had plenty of time to prepare for the expected November Base Rate cut. What has been harder to predict is the highly precarious geopolitical situation.
Among the torrent of recent globe-shaking events: Donald Trump has been elected as President of the United States for the second time, Vladimir Putin has retaliated against the UK’s supply of Storm Shadow cruise missiles to Ukraine by threatening massive cyberattacks, and the Prime Minister of Israel Benjamin Netanyahu has been issued an international arrest warrant for alleged war crimes against the Gaza population.
All this has resulted in much hesitancy in the money markets. Very few people are looking for variable rate mortgages when things are so uncertain.
Landlords sitting on their lender’s standard variable rate (SVR) or are coming up for renewal could benefit greatly from remortgaging and a fixed rate can give certainty at a time of much change.
Call our experienced mortgage advisors for assistance in remortgaging if this is something you’re interested in pursuing. They are also able to help with any other queries you may have.
