A couple of decades ago, the topic of inflation would often make the news. In fact, in the 1990s it almost reached a very newsworthy 8%. And then things seemed to level off – for quite some time. However, it’s back in the news again, which can mean only one thing – inflation is on the up. But what exactly is inflation, why is inflation increasing and how does inflation affect mortgage rates?

What is inflation?

Inflation is an increase in the cost of living. This in itself isn’t that bad, nor is it unexpected. After all, the price of almost everything goes up eventually.

However, if the cost of living rises too quickly it becomes a problem, as people’s wages don’t tend to rise in parallel. This means that the amount people earn is worth less (in real terms) than it was prior to inflationary rises; people’s income essentially gets eroded.

At the time of writing, inflation stands at 4.9%* – down from 30-year high of 5.4% in December.

Why is inflation happening?

Much is being made of the rising global price of energy, supply chain issues (predominantly a lack of supply and higher shipping costs) and staff shortages.

To add more fuel to an already growing fire, 2022 is expected to see an increase in high street retail prices, rail fares, and TV and broadband pricing. All of these factors will play a contributory role in the rising cost of living.

How will inflation affect my mortgage payments?

To counter inflation, the Bank of England typically raises interest rates – a move that we have seen over the last few months, when it took the UK interest rate from 0.10% to 0.50%.

This is typically good news for those with high levels of savings and no mortgage. However, for those on tracker mortgages or standard variable rate mortgages, it means higher monthly payments.

As a Guildford mortgage broker that’s been in business since 2006, we’ve seen the interest rate drop from around 5% to an all time low of 0.10%. Given how it couldn’t really go any lower, we’ve always known that there’s only one way it can go – and if inflationary pressure continues to build, interest rates are likely to continue rising.

This is where we can help.

Beat inflation with a fixed rate mortgage

Over the last few years we’ve seen some of the best UK mortgage deals that Complete Mortgages has ever seen.

From those applying for a first time buyer mortgage to those applying for adverse credit mortgages, mortgage rates have been astonishingly low. However, interest rate rises coupled with a growing inflation problem suggest that this might change over the coming months.

From a mortgage perspective, the best way to address this is to take advantage of the best fixed rate mortgage deals in the UK right now by contacting one of our Guildford mortgage advisers.

There are still great mortgage deals to be had. We’re just not sure how long the current rates are going to be on the market for.

If you need to remortgage, apply for a new mortgage or simply require some professional mortgage advice on how to mitigate the impact of inflation, then contact our team of mortgage brokers in Guildford on 01483 238280 or e-mail info@complete-mortgages.co.uk.

*Source: Office for National Statistics