Inflation has surged to unsettling levels, throwing a wrench in the Bank of England’s attempts to control rising prices, with the dream of cheaper mortgages now looking less likely for the foreseeable future.
The latest data reveals a troubling spike in inflation, now deep into warning territory, and it’s clear that the Bank of England’s mission to keep Consumer Price Index (CPI) inflation at 2% is facing significant hurdles.
While some may argue that the November inflation surge was anticipated, driven in part by a one-off increase in energy bills, the bigger picture is far more concerning.
Core inflation, which excludes volatile elements like energy and food prices, continues to climb steadily, now standing at 3.5%.
This persistent rise signals that inflationary pressure is unlikely to subside on its own anytime soon.
The Office for National Statistics (ONS) also released data showing wage inflation is picking up for the first time in a year.
This could further feed into overall consumer inflation in the coming months, raising concerns for household budgets across the country.
Bank of England will likely adopt a much more hawkish stance on interest rates
In response to these inflationary pressures, the Bank of England will likely adopt a much more hawkish stance on interest rates than previously expected.
The reduction in the Bank’s base rate, which had been anticipated for early 2025, may now be delayed as the Bank seeks to tame inflation.
This poses a significant issue for prospective homebuyers or anyone planning to remortgage in the New Year. Mortgage lenders, eager to win over customers, may attempt to lower their interest rates in January.
However, the current inflationary environment means that their ability to offer lower rates will be heavily constrained.