UK Inflation unexpectedly jumps to 10.4% in February – advisers and mortgage experts share their responses

by | Mar 22, 2023

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With the latest UK inflation data published this morning showing an unexpected jump to 10.4% to the end of February from 10.1% in January, it will not only give the Bank of England’s MPC lots to think about ahead of their interest rate decision tomorrow, but also for consumers it reminds us that the cost of living crisis is far from over.

Commenting on today’s inflation data, advisers and mortgage experts have been sharing their views with IFA Magazine some via Newspage, and others directly as they look ahead for what this means for savers and borrowers:

Rohit Kohli, operations director at Romsey-based mortgage broker, The Mortgage Stop: “This rise has taken all the forecasters by surprise as all expectations were for a drop to just below 10% given recent trends. What is concerning for everyone is that it’s being driven by food inflation, which always lags behind other price increases, and this will have an impact on all households but especially the lowest income families. The Bank of England now has a very tough decision to make on Thursday. With recent banking issues, there was a demand to hold interest rates but with these inflation figures, will they be able to? The housing market was starting to pick up in recent weeks. Another rate hike tomorrow could cool things down again. This will also re-open the debate on the government’s flagship commitment to halving inflation, with no real plan in place when they made it. What ability or control do they actually have to deliver on it?”

 
 

Rachel Winter, Partner at Killik & Co, said

“With the impact of the Central Bank’s interest rate hikes stalling as inflation rises unexpectedly, the Monetary Policy Committee is placed in an even more difficult position when it comes to the pressure to pause on interest rate rises. 

“However, with the OBR forecasting that inflation is set to reduce to 2.9% by the end of 2023, today’s reading is hopefully just a bump in the road to getting inflation back under control.  “Despite this, the reality is that prices remain high, the cost-of-living crisis persists, and inflation continues to hit people’s cash reserves. These issues pose tough questions to investors who want to ensure they have enough cash holdings but are also making smart investment choices to help mitigate inflationary erosion.

 
 

Craig Fish, Managing Director at London-based mortgage broker Lodestone: “The Monetary Policy Committee now faces a very difficult decision. There was a wide expectation that rates may well have been kept on hold this week, but I now fear that this may not be the case and we will see a 0.25% increase. I do hope, however, that they consider the fact that this slight jump has mainly been caused by food supply costs and that a further increase in base rate will hurt the economy as a whole. I do not see this having an immediate impact on borrowers, however, as we are seeing lenders’ rates fall in general. The only people who will be affected directly will be those on a tracker mortgage if the base rate is increased.”

Jamie Alexander, director at Southampton-based Alexander Southwell Mortgage Services: “High inflation is bad news for savers and this level of inflation is especially bad. Now all eyes are on whether the Bank of England reacts on Thursday and decides to raise interest rates for the 11th meeting in a row. This will affect borrowers on trackers and the wider property market if it subdues demand. This latest inflation data certainly provides the perfect excuse to hike rates again. I don’t think the inflation figure of 10.4% was unexpected. Regardless of January being slightly lower, it was never going to be a smooth lower trajectory to reach the predicted 2.9% by the end of the year. However, the comparison figures against other G7 countries do look bleak.”

Richard Ollive, senior financial adviser at the Wesleyan Group, said: “The Bank of England could raise interest rates once more when it meets tomorrow, but savers are unlikely to see the benefit any time soon and there could be even higher costs for those with fixed rate mortgages about to expire and those already on tracker rates.

 
 

“Mortgage-holders in this situation should consider reviewing their options with the help of a professional mortgage adviser. Meanwhile, those who can put some money aside should consider how to make it work as hard as possible.”

Simon Jones, CEO of InvestingReviews.co.uk: “With the inflation rate rising again, the value of people’s money has been further reduced and I doubt savings rates will follow suit. This is another serious blow to the Chancellor, savers, certain borrowers if the base rate rises and the broader economy. The cost of living crisis is still hitting households hard and faith in the UK government to control inflation is floundering fast.”

Mark Grant of Gloucester-based business finance broker, The Business Finance Branch“After a week where the Budget signposted inflation back to 2.9% by the end of 2023 and swap rates indicating that further interest rate rises may not be imminent, this morning’s Inflation data is a reminder to businesses that the route to both is not a straight line, and we are not there yet. Planning and budgeting to deal with, and trade out of, the current economic environment is still critical and necessary for many businesses.”

Gary Bush, financial adviser at the Potters Bar-based MortgageShop.com: “This surprise rise in the inflation rate confirms that the Bank of England should not shy away from increasing the base rate at least by a further 0.5%, despite the global banking failures. The UK needs to force a lid on the inflation situation once and for all. Clearly rising rates will not be great news for certain borrowers and the property market.”

Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com“The unexpected jump in February’s inflation figure is the last thing the Bank of England needs. Fearful of placing further pressure on bond prices, it was widely expected the central bank would leave the base rate unchanged at 4% when it meets tomorrow. With inflation proving stickier than many commentators thought, all bets are off again.”

Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial: “Any suggestions the Bank of England was going to take its foot off the gas after the banking shock is now for the birds. Even though these figures aren’t unexpected, as food prices continue to jump due to the lag in energy costs filtering into commodities, the Bank of England still might impose a 0.5% rate hike on us.”

Riz Malik, director of Southend-on-Sea-based R3 Mortgages“The rise in UK inflation figures shows a slight increase, primarily due to rising prices in the pub and restaurant sectors, in an unexpected turn of events. Despite this development, inflation is still expected to significantly fall by the end of the year. Given the recent banking crisis, the Bank of England may have kept a neutral stance and refrained from raising interest rates on Thursday. However, given the most recent inflation data, a slight increase in rates is now likely.”

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