Brits are bracing for a longer squeeze as interest rates risk staying ‘elevated for longer’, experts warn.
Inflation roared back last month, jumping to 2.3% in October, smashing the Bank of England’s 2% target and dashing hopes for relief.
The hike – up from 1.7% in September – was fuelled by soaring energy costs, the Office for National Statistics said.
And the pain’s not over yet. Analysts say policymakers are ‘unlikely’ to slash borrowing costs in December, spelling trouble for homeowners and borrowers alike.
INFLATION COULD ROCKET FURTHER
Adding to the heat, economists predict inflation could rocket to 3% next year, thanks to Budget measures unveiled by Rachel Reeves.
Her plans to boost National Insurance and the minimum wage are set to pile on the pressure, leaving millions wondering when – or if – things will cool down.
Worryingly one City pundit told Property Soup: “Wallets are feeling the burn and there’s no ice in sight.”
WORRYING
Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners, says: “An uptick in the headline inflation figure will be worrying for households who may be fearing a return to the dark days of rapid price rises that devastated household budgets in recent years. Higher inflation diminishes spending power and erodes savings, making it harder for people to maintain their living standards.
“While inflation at 2.3% remains still a vast improvement on the peak of 11.1% at the height of the cost-of-living crisis two years ago, households are likely to be concerned that the current period of improving financial flexibility may prove to be short-lived.”
DISAPPOINTING
Nathan Emerson, Chief Executive at Propertymark, says: “It is disappointing to see that inflation has increased considering the overall trend throughout the year.
“However, there are many national and global factors that impact the UK economy, hopefully inflation will better stabilise, and the UK economy should continue to adapt, no matter what happens in response to national and international events.
“With housing playing a vital role in the growth of the economy, over time it would be positive to see interest rates drop to levels not seen since 2019, in order that more people can afford to enter the housing market for the first time, or make their next all-important home move.”
HOPES DASHED
Iain McKenzie, Chief Executive of The Guild of Property Professionals, says: “While inflation was widely expected to creep up today, as a result of rising energy prices over the winter, it dashes hopes of another interest rate cut before Christmas.
“The coming months are typically a quieter time for estate agents and provide a chance for them to encourage homeowners that now is a good time to sell up.
“The winter could be a litmus test for the industry. If house prices and demand hold steady, it is likely that any minor changes in inflationary pressure and interest rates will still keep the market firing on all cylinders.”
HIGHEST IN SIX MONTHS
And Nicky Stevenson, Managing Director at national estate agent group Fine & Country, adds: “Today’s data shows inflation climbed by 2.3% in the year to October — the highest in six months. Nevertheless, it remains close to the government’s 2% target, offering a degree of economic stability.
“The property market continues to demonstrate exceptional resilience in the face of uncertainty. To sustain this momentum and strengthen buyer confidence, policymakers and lenders must prioritise accessibility and affordability, particularly for first-time buyers.”
CAUTIOUS OPTIMISM
Simon Webb, managing director of capital markets and finance at LiveMore, says: “Although CPI has risen to 2.3% in October, it’s worth noting that this remains significantly lower than the 4.6% we saw for the same period last year.
“Combined with the Bank of England’s recent decision to reduce the base rate to 4.75% and the Budget’s planned 4.1% state pension increase from April 2025, there’s reason for cautious optimism.
“These measures provide encouraging news for over-50s borrowers, offering the potential to ease affordability pressures and enhance financial stability in future.”
MORE CAUTIOUS
Mark Harris, Chief Executive of mortgage broker SPF Private Clients, says: “With inflation rising to 2.3%, the Bank of England could well be cautious at next month’s meeting and press the hold button rather than cut base rate further.
“Further rate reductions are more likely next year than this one, with Swap rates rising on the back of today’s inflation figures. However, while inflation rose more than expected, it’s still only just above the 2 per cent target and fluctuations are not unexpected.
“Mortgage rates have risen in recent weeks on the back of higher Swap rates, with no sub-4 per cent fixed rates now on offer. That said, fixes are pegged only just above this level so borrowers should not panic. As always, plan ahead as much as possible and seek advice from a whole-of-market broker.”
