The release of inflation data has revealed that inflation remained stubbornly steady in September. The information comes weeks before the next meeting of the Bank of England’s Monetary Policy Committee (MPC) is scheduled to discuss if the standard base interest rate should be increased again. There was not a meeting of the MPC in October, and the last meeting which occurred in September left the rate at 5.25% and broke the fourteen meeting trend of hiking the rate which had started on December 2021. Another rate hike might be needed to push inflation down, but whether the economy and consumers are able to absorb another rate hike is an important consideration for the MPC.

Inflation was reported at 6.7% for September and remains more than three times the target rate of 2.0% set by the Bank. Meanwhile, in the three months to August, UK wage growth stayed close to record highs. This could be an indication that spending will continue, keeping demand strong and prices will remain high or could actually increase.

The MPC attempts to curb spending with higher interest rates to bring demand and prices downward as supply grows. Overall, wage growth is a good thing, but when spending is keeping inflation high, the MPC might be pushed to kick the standard baes rate even higher than it is currently. The available rate offerings by lenders are considerably higher for borrowers than they were only one year ago, and certainly higher than two years ago.

The current base rate is 5.25%, which is more than double the base rate in October 2022 of 2.25% and considerably higher than the 0.1% base rate of October 2021.

Inflation is an important concern for the economy. The longer inflation remains, the greater the impact on consumers. In a recent report from Savills, reviewing the housing market data of Nationwide, it was determined that despite the record high housing prices of recent years, homeowners lost value of their homes when inflation was taken into consideration.

Leaving the base rate steady in September helped those borrowing, including homeowners seeking remortgages. Lenders lowered their offerings in reaction the MPC decision due to a more optimistic outlook on inflation and the economy thus lowering the risk of lending. With the report that inflation did not budge in September, lenders could begin to increase their rates on loans despite the MPC meeting for November being weeks away.

The forecast is tricky for what the MPC will do and how lenders will respond both before the meeting and after. With experts still unclear as to what will happen, it is even harder for homeowners to grasp the details and create a strategy moving forward for their own unique financial needs.

One thing is clear for homeowners and that is there is not going to be a return to the historically low interest rates offered in 2021. The low rates were the result of the impact of the global pandemic on the economy. This is important to consider for homeowners that obtained a two-year fixed rate mortgage at the close of 2021 and are nearing the end of their term. Once their term ends, so will their cheap rate. Despite the increase in the rate that occurred in December 2021, the base rate only rose to 0.25% until February 2022. While more than double the previous 0.1%, it was still considerably lower than the current 5.25%.

Homeowners that obtained a fixed rate deal at the end of 2021 or at the start of 2022 will soon come out from under the shield of the fixed rate that so far has saved their budget from facing the rate hikes. At the end of their term, the homeowner could choose a remortgage, or the lender will move them to their standard variable rate or SVR.

A remortgage is likely to have a lower interest rate and therefore a more affordable rate than a SVR, making shopping for a remortgage sooner rather than later a good tactic for saving money.

Not only could avoiding a SVR save money, but choosing another fixed rate will keep the homeowner from paying more should the MPC need to hike the rate again. 

Shopping for a remortgage is easily done online at any time that is convenient to the homeowner. They can go from remortgage lender website to website to gather quotes, or a quicker solution is to shop online with a remortgage broker. Brokers work with many lenders on behalf of the borrower and in a matter of minutes the homeowner could have numerous remortgage quotes in hand to review and compare from a variety of lenders. Brokers could also offer exclusive deals from lenders not offered directly from lender to borrower.

Waiting for a drop in the Bank’s standard base rate which would lead to a decline in borrowing costs through lower remortgage interest rates is not a likely scenario in the months or perhaps year to come. Inflation seems to be set in and either it will be a long and steady journey to it reaching target rate or the MPC will have to choose to be more aggressive in taming inflation and raise the base rate again. All will be revealed when the next meeting of the MPC occurs on 2 November.