inflation shopping

What do the latest inflation figures mean for the housing market?

UK inflation has proven stubborn in the latest announcement, but the Bank of England is being urged not to raise interest rates when it makes its decision next month.

This week, two important revelations were made regarding inflation: the first, on Monday, that wage growth actually outpaced the rate of inflation for the month of August; and the second on Wednesday, that UK inflation did not fall as expected in September, holding at a rate of 6.7%.

Both of these factors will be among the things taken into account when the Monetary Policy Committee meets to decide whether the Bank of England will raise, lower or maintain interest rates on 2nd November. In the last announcement in September, the rate was held at 5.25% after 14 consecutive hikes.

This decision is likely to affect thousands of households with mortgages, as well as investors and landlords who own their properties with mortgages, although lenders’ rates do not always directly tally with what happens with the Bank of England rate.

The good news is that mortgage rates have been steadily coming down from their peak over recent weeks, with lenders bringing even more products to the market and competing for customers on many of their fixed rate deals. Those whose products are expiring in the next six months are being urged to take action now.

Why does inflation affect interest rates?

Inflation is the measure of how much the price of goods and services have increased annually – so at the moment, on average we are paying 6.7% more than we were this time last year. But official figures also showed that average wages increased by 7.8% annually in the three months to August, outpacing inflation.

However, many households continue to feel the pinch, and the idea behind increasing interest rates is to bring inflation back under control – with the theory that slowing down spending will bring prices back down again, eventually to the Bank of England’s target of 2% by mid-2025.

Unfortunately, raising interest rates also means that borrowers find themselves spending even more on their mortgages. This can have a knock-on effect on the housing market as appetite wanes – although many recent reports have demonstrated that demand remains high for UK property.

Bank shouldn’t increase interest rates

Propertymark, which is a leading UK membership body for property professionals, is arguing that the Bank of England should not raise interest rates off the back of the latest inflation figures at its next meeting.

Nathan Emerson, CEO at Propertymark, said: “We are keen to see inflation drop, as this is essential to help ease the financial pressures on many households. There must be confidence in the economy, however the balance between inflation and interest rates is a very fragile path which must be very closely monitored and responded to.

“Households should never find themselves in a near impossible situation where they are impacted by high inflation and high interest rates to the point they cannot get by each month.”

He added that it would be positive to see interest rates drop over the coming months, “as this would release the financial pressures of the last twelve months for many households”.

Emerson also urges borrowers to stay up-to-date with what is happening in the mortgage market, ensuring that you switch if you are able to find a better product. Borrowers should also speak to their lender if they are struggling with repayments, “as they have a duty to help where possible and will also be keen to do so”.

Meanwhile, Amanda Aumonier, director of mortgage operations and sales at, pointed out that while a further interest rate hike could be bad news for homeowners, those sitting on the fence at the moment waiting to make a decision on a purchase should think more about their finances than timing.

“If you’re a first-time buyer wondering when will be the right time to put in an offer, there may never be a “perfect” time,” she said. “The key is not to commit to a mortgage that would overstretch you financially.

“For those needing to remortgage soon, don’t bury your head in the sand – you can speak to a mortgage broker up to six months before the end of your current deal to understand how much extra you need to budget per month on your mortgage repayments.”

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