News this week that inflation jumped from 1.9% to 2.9%. This calculation means that the Monetary Policy Committee (MPC) will be facing some tough decisions in February about what to do with interest rates. The government are still pushing for their stimulus of reform by keeping interest rates low. Despite all of this pressure the MPC vote independently and will find it hard pushed to deliver low interest rates for much longer (Source).
Historically, interest rates have been the control mechanism for inflation. The economic rule of thumb being that interest rates must increase to maintain price stability and therefore reduce inflation and the price of goods and services from rising which will be even more harmful for the economy.
The MPC will have to decide whether this is a temporary adjustment to the stimulus put in place to aid economic recovery or whether this figure is the just the beginning of a sharp increase, last seen in the late 1970’s.
In our previous newsletter I highlighted the importance this Spring of securing fixed rate mortgages whilst they remain low. I expect that over the Summer there will be a huge demand for these products and this always increases the product pricing levels and the cost of organising such products in the form of lender arrangement fees.
If you are sitting comfortably on a low variable rate mortgage; NOW is the time to sit up and pay attention to the market. The only way is up for interest rates this year and timing is crucial.
Talk to us about your current arrangement and check your current mortgage deal to see if it worth fixing it.
