Finally, inflation seems to have let go of its stubborn grip and could be heading more rapidly toward the target rate of 2.0% than in months past. In June, the decline to 7.9% was hopeful as it could signal interest rates might not be increased as steeply as had been predicted. However, the change in the inflation rate will not slow down the efforts of the Bank of England’s Monetary Policy Committee (MPC) to tame inflation. Rather it is expected they will continue the assertive actions of past meetings to keep the momentum going. This could result in either a 0.25% or 0.50% rate hike to the Bank’s standard base rate of 5.0%. Either rate increase will take the base to a new high not seen in a decade and a half. 

The latest news on interest rates could be good or too optimistic. According to some experts, the peak rate is considered to be much lower than what was previously thought with an expected top rate of the Bank of England’s standard base rate of 5.75%. This is a positive switch from the previously expected rate of 6.50% and even with some experts forecasting higher and closer to 7.0%. The lower peak rate has come about due to inflation declining after being stubborn and barely budging with previous rate hikes. 

The countdown leading up to the next Bank of England’s Monetary Policy Committee (MPC) meeting has begun. Next week, the MPC will meet and decide on the state of the economy and discuss inflation. The result will be either another rate hike or allow the rate to remain steady. There is little to no chance of a rate cut. The expectation is for the rate to be increased by at least 0.25%, but more possibly 0.50% because while inflation has declined, it is still far from the target of 2.0%.

The latest data released on remortgage trends has revealed that homeowners might be hoping for rate cuts in the near future. Most remortgaging homeowners in May had chosen five-year fixed remortgage deals, but in June it shifted from 50% to 46% as more borrowers picked two-year fixed rate deals. While five-year fixed rate remortgages were still the most popular, 38% had chosen a two-year deal. Perhaps the small drop in homeowners choosing five-year deals is thought to be optimism that inflation is coming under control and in two years when their deal ends the offered deals will be attached to favorable interest rates.

In another sign that the housing market is changing, the latest news from British homebuilders is the plan to build fewer homes as they expect high mortgage rates to slow down demand. The lack of first-time buyers is likely to be the most absent group from the housing market. Not even government schemes that have helped in the past to put home buyers into new starter homes such as the Help to Buy scheme would be enough to make buying affordable, so say experts.

Homeowners have had financial pressure due to higher interest rates. Those not on fixed rate mortgages have been dealing with rising repayments. Those that did secure a fixed rate are likely to face more expensive borrowing when their mortgage term ends. This is especially true for those that obtained two-year fixed mortgages ending this year. Those deals were offered when interest rates were historically low, but ending this year will make them disappear and leave homeowners shopping from interest rates higher than in over a decade.