The inflation rate climbed to 3.6% in the year to June 2025, threatening the prospect of an August base rate cut.<\/p>\n
This latest increase, from 3.4% the month before, means inflation is at nearly twice the rate of the Bank of England\u2019s 2% target.<\/p>\n
Peter Stimson, director of mortgages at the lender MPowered Mortgages, said: \u201cThe Bank\u2019s Governor has spent weeks hinting that a Base Rate cut in August was all but a done deal.<\/p>\n
\u201cBut that certainty has evaporated in the face of today\u2019s inflation data. CPI is not far off double the Bank\u2019s 2% target, and core CPI is climbing too \u2013 confirming that the problem isn\u2019t just the product of temporary factors like the spike in oil prices seen following America\u2019s air strikes on Iran.<\/p>\n
\u201cSeveral members of the Bank\u2019s ratesetting Monetary Policy Committee had sounded unconvinced that the time is right to cut the Base Rate to give the stagnant economy the boost it needs.<\/p>\n
\u201cBritain\u2019s inflationary relapse will crystallise that view, and when the MPC meets in three weeks\u2019 time it\u2019s likely several members will vote to hold off on a rate cut.<\/p>\n
\u201cWhile the weakness of the economy means the Bank will be keen to resume rate cuts in coming months, the likelihood of an August cut has plunged from near certain to barely 50\/50.<\/p>\n
\u201cThis is likely to cause a shift in the swap rates which determine mortgage interest rates.<\/p>\n<\/p>\n
\u201cMortgage rates may well have fallen as far as they can for now, and in the coming weeks rates may even creep up back as lenders recalibrate in response to rising swap rates.\u201d<\/p>\n
The Bank\u2019s rate setting group the Monetary Policy Committee will next meet on the 7th August.<\/p>\n
Paresh Raja, chief executive of specialist lender Market Financial Solutions, urged the Bank to cut the base rate despite the increased inflation.<\/p>\n
He said: \u201cThe Bank of England\u2019s Governor, Andrew Bailey, recently commented that he would consider lowering the base rate if the labour market continues to soften.<\/p>\n
\u201cAnd yet, his accompanying caution about cutting rates while inflation remains above 2% continues to frustrate many in the property market. That target now feels like more than a guideline \u2013 it\u2019s starting to carry disproportionate and potentially harmful weight.<\/p>\n
\u201cThe Bank has cut rates while inflation was above target in the past. This moment should be no different. Economic growth has stagnated for two consecutive months, so it feels like the right time to stop fixating on short-term CPI trends and start prioritising policies that support recovery.<\/p>\n
\u201cIn turn, by cutting the base rate, the Bank would give property buyers and investors the confidence they need to resume their investment plans and encourage greater activity across the property market \u2013 and across the wider economy \u2013 in the final five months of the year.\u201d<\/p>\n
The base rate currently sits at 4.25%.<\/p>\n","protected":false},"excerpt":{"rendered":"
The inflation rate climbed to 3.6% in the year to June 2025, threatening the prospect of an August base rate cut. This latest increase, from 3.4% the month before, means inflation is at nearly twice the rate of the Bank of England\u2019s 2% target. Peter Stimson, director of mortgages at the lender MPowered Mortgages, said: […]<\/p>\n","protected":false},"author":1,"featured_media":1703,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-1702","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-second-home"],"yoast_head":"\n