According to a recently published article from the National Office of Statistics, most recent figures from October 2024 show inflation at a slight increase to 2.3%, which is only a bit higher than the Bank of England’s target of 2%. However, inflationary pressures are still influencing key areas like housing costs, transport, and food prices.
How Does Inflation Affect Mortgage Rates?
While inflation has been slowing down compared to last year, it’s still a significant factor when it comes to mortgages. The Bank of England uses inflation as a key measure to adjust interest rates. If inflation is too high, the Bank raises interest rates to cool down consumer spending, which can lead to higher mortgage rates. However, if inflation is too low, the Bank might lower rates to encourage spending, which can be a good thing for buyers looking for more affordable mortgage options.
In October 2024, we saw inflationary pressures shift, with a notable rise in housing costs, especially energy prices. This can directly affect homebuyers and homeowners alike, as higher energy costs can add to the cost of living, ultimately impacting your ability to manage monthly expenses and mortgage payments. For prospective homebuyers, this could mean considering mortgage deals that lock in fixed rates, offering security in the face of rising costs.
What Are the Current Trends in Housing Costs?
The biggest contributor to the rise in inflation has been housing and household services. As energy prices surged in October 2024, with electricity rising by 7.7% and gas prices jumping 11.7%, these costs are certainly something that mortgage brokers need to consider when advising clients. While gas and electricity prices have fallen from their peaks, they’re still significantly higher compared to a few years ago, which can influence monthly household costs.
Additionally, housing affordability remains a concern. With higher energy prices, homeowners may find themselves spending more on household services, which could affect their ability to afford mortgage payments or take on new loans.
How Does the Inflation Data Affect Homebuyers?
For many looking to enter the housing market, this change in inflation means keeping an eye on mortgage rates. With inflation increasing slightly, we could see the Bank of England maintaining or even raising interest rates in the short term. While rates may still be lower than historical highs, this could impact your mortgage plans, especially if you’re looking for a competitive rate or considering a fixed-rate mortgage to safeguard against future increases.
For current homeowners, inflation could be an opportunity to reassess your mortgage. If your current deal is nearing its end, now may be the right time to speak to a mortgage broker about locking in a rate before further inflationary pressure pushes rates higher. It’s always good to get ahead of these changes, and a broker can help you navigate the best options for your circumstances.
As we move into the end of 2024, inflation remains a key factor to consider when planning your home purchase or refinancing your mortgage. Understanding the latest trends and how they affect mortgage rates can help you make more informed decisions about your financial future. Whether you’re a first-time homebuyer or looking to refinance, consulting with a mortgage broker can give you the best possible advice for your situation. With inflation figures expected to remain volatile, now is a great time to ensure your mortgage is as affordable and secure as possible.
