Inflation is at more than double the target rate set by the Bank of England.  The target rate is 2.0 per cent and this coming week new figures are expected to show that June’s inflation rate was 4.5 per cent.  It isn’t expected to decline soon either, with forecasts calling for a 5.0 per cent rate in the next few months.  It is with a rising inflation rate that economists are usually putting out forecasts of an interest rate hike by the Bank of England’s Monetary Policy Committee, but this time there is a difference.

Inflation is rising, but the economy is not strong enough for an interest rate change yet.  Some expect that inflation will self-correct and no longer be an issue as the public spending cuts further impact the economy.  Others say an interest rate increase is long overdue and consumers are ill prepared that the longer the rate goes unchanged the larger the increase will have to be to curtail inflation.  In fact, some experts are saying the longer we go without the MPC increasing the rate the larger the first rate increase will have to be and we can expect many more to follow.

This is news that homeowners need to pay particular attention to as there is a large majority that have yet to remortgage and lock in a low interest rate for their monthly mortgage payments.  For some they are not prepared for even a slight increase and what it will do to an already stretched and weak household budget.  The good news is that currently the lack of interest rate increase warnings has provided a competitive market with lenders seeking to get homeowners in to do remortgaging.  The result is that there are very good remortgage deals being offered and those that can benefit from a remortgage will find very attractive offerings by lenders as well as an easement on previous tight lending practices.