Inflation hits a 30-year high – but why, and what might it mean for mortgages?
Inflation is the rate at which the things we buy go up in cost, and it’s risen to 5.14% in the 12 months to December 2021 – it was 5.1% the previous month. You have to go way back to March 1992 to find a higher rate of inflation – it was 7.1% then.
Rising fuel and energy prices have been all over he news in recent weeks, but it’s more complicated than that and it’s not just here in the UK. This BBC article provides an excellent summary of 7 reasons why inflation is surging around the world:
- Rising Energy & Petrol Prices
- Goods Shortages
- Shipping Costs
- Rising Wages
- Climate Impact
- Trade Barriers
- The End of Pandemic Support
Energy prices look set to keep on climbing so things may well get worse before they get better.
What might this mean for my mortgage?
Well in light of the continuing increases to inflation, the Bank of England’s Monetary Policy Committee (MPC) is thought likely to increase the base rate again. Some are predicting this will happen several times this year with the next increase in February, to an estimated 0.50%.
If you have a base rate tracker your payments would go up, whilst if you’re on a fixed rate they definitely won’t as your payments are guaranteed for the duration of the fixed rate period. If you’re on a discounted product then it depends on whether your lender chooses to increase their Standard Variable Rate (SVR) – but usually they do, so expect an increase.
If your mortgage isn’t fixed or if your current fixed rate is due to end in the next 6 months it might be possible to secure a new product and shield yourself from potential future rate increases. Even if you’re not sure it’s worth taking advice and we’d be happy to put you in the picture.
If this has got you thinking feel free to get in touch and we’ll be happy to help you understand what’s possible, or sign up to our monthly newsletter, to keep your finger on the pulse.
Sam Murphy – 19th January 2022