The UK’s main measure of inflation, the Consumer Prices Index (CPI), rose to 3.3% in the year to March, according to the Office for National Statistics, up from 3% in February.
The increase was largely driven by higher energy costs, linked to the ongoing conflict in the Middle East.
With costs expected to keep rising in the coming months, inflation may now stay higher for longer than previously hoped. A broader measure of inflation, the Retail Prices Index (RPI), which includes housing costs, rose to 4.1% in the 12 months to March, highlighting the continued pressure on household budgets.
What does higher inflation mean for my mortgage?
Inflation plays a key role in which direction interest rates move. When inflation rises, the Bank of England is less likely to cut rates and may even keep them higher for longer, which affects mortgage pricing.
Mortgage rates have already fluctuated a lot since the Iran war began thanks to volatile swap rates. These are the rates lenders pay to secure fixed borrowing costs. When they rise, fixed mortgage rates usually go up; when they fall, rates often follow.
Lenders are also changing deals quickly, with some mortgage offers lasting little more than a week before being withdrawn or repriced. For borrowers, this means less certainty and fewer chances they might miss out on a good deal if they don’t act fast.
What can you do?
If you have a mortgage deal that’s ending soon, or are planning to buy a property, it’s worth planning ahead.
Many lenders allow you to secure a new rate several months in advance. This can protect you if rates rise further, while still giving you the option to switch to a better deal if rates fall before your new mortgage starts.
If you’re buying a home or remortgaging, acting quickly can help you avoid missing out, as deals may not be available for long.
If you’re worried about having the time to scour the market yourself, it may be worth speaking to a broker. They can help you compare options and find a deal that suits your situation and also support you throughout the application process.
