UK Inflation Rises to 3.5%: What It Means for Mortgage Borrowers

The UK's annual inflation rate rose unexpectedly to 3.5% in April, up from 2.6% in March, reaching its highest level in over a year. The latest figures have prompted a reassessment of the interest rate outlook and could have important implications for mortgage holders and prospective borrowers.

What's Driving the Inflation Surge?

The rise in inflation was primarily driven by:

• Increased utility bills and council tax, both of which took effect from 1st April
• A 5.4% rise in services inflation, influenced by higher employer National Insurance contributions and the increase in the National Living Wage

The bank of England had forecast a rise to 3.3%, with inflation expected to peak at 3.7% between July and September 2025. April's figures have exceeded these expectations, raising concerns about the persistence of inflationary pressures.

Interest Rate Expectations Reconsidered

Until recently, market consensus pointed to at least two base rate reductions by the Bank of England in 2025, beginning as early as June. However, following the latest inflation data, economists have revised their forecasts, now anticipating a single rate cut later in the year.

Earlier this week, Bank of England Chief Economist Huw Pill, expressed concern this week about the pace of rate reductions, warning that inflation momentum may be stalling. 

Impact on the Mortgage Market

With inflation climbing, the Bank of England may now hold off on reducing the base rate. 
As a result, swap rates which lenders use to price fixed-rate mortgages - have also increased.

This shift makes it less likely that mortgage rates will fall in the short term.

For borrowers, this means that the current environment of relatively competitive mortgage rates may not last. Those waiting for lower rates may find that opportunities become more limited in the near term.

Importance of Expert Advice

Given the ever-changing market conditions, seeking the assistance of a mortgage consultant is more important than ever. With their expertise, you can navigate these fluctuations effectively and find the best possible mortgage options tailored to your needs.

Our experienced mortgage consultants are ready to assist you with personalised guidance every step of the way. For initial consultation, speak with our experts or call us at 01628 56461. We're here to help you navigate your mortgage journey with informed advice and care.

The information contained within was correct at the time of publication but is subject to change.

Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage.

Source: Financial Times and Express