The Bank of England has kept the base rate the same, but rising inflation and higher lender rates continue to create uncertainty for borrowers. If your mortgage deal ends within the next six to nine months, now could be a good time to review your options.
The Bank of England has held the base rate at 3.75% in the latest review on 17 September. Despite rising inflation and lenders raising mortgage rates, the Bank has kept the rate unchanged for now.
Headline inflation, which reflects changes in the cost of everyday essentials such as food, transport and energy, rose to 3.1% in August, up from 2.9% in July. This increase was driven largely by higher fuel prices and airfares.
Unpredictable financial markets
The base rate has remained at 3.75% since last December (when it was cut from 4%), but financial markets remain unpredictable. A 0.25% rate rise is currently forecast for early 2027, although no one can say for sure what will happen.
Several major lenders have already increased their mortgage rates twice this month as swap rates (the cost of borrowing between financial institutions) have climbed. Higher swap rates mean higher borrowing costs for consumers.
Inflation is also expected to continue rising through the rest of the year, with some experts predicting it could peak at around 4.2% in January. Households may face further pressure from energy bills, as the energy price cap will rise by around 4% in October.
Food price inflation stable
However, there is some positive news. Food-price inflation remained stable at 1.3% in the 12 months to August, while core inflation stayed at 2.6% and services inflation remained at 3.4%. The UK economy has also proved relatively resilient, although rising oil prices could have a greater impact in the months ahead.
If your mortgage deal is due to end within the next six to nine months, we encourage you to seek advice now from an experienced mortgage broker. Whatever happens in the wider economy, we’re here to help.