Warning to anyone with a mortgage after inflation surges to highest rise in 2 years | Politics | News

Today’s inflation spike “effectively closes the door” on an interest rates cut next month and represents bad news for homeowners and borrowers alike, experts have warned.

The Consumer Prices Index (CPI) rose by 2.3% in the 12 months to October 2024, its highest level since April, according to the Office for National Statistics (ONS).

This marks a sharp increase from 1.7% in September, representing the steepest month-on-month rise in inflation for two years.

The uptick surpassed economists’ expectations, who had predicted a rate of 2.2%, and highlighted renewed upward pressure on prices following a recent period of subdued inflation.

John Choong, Head of Equities and Markets at Investors Edge said: “Today’s CPI data effectively closes the door on a December rate cut. Given the figures were higher than market expectations, the outlook for inflation remains challenging due to a higher October base effect.

“The persistent rise in core Producer Price Inflation (PPI is also another worry), and signals potentially stickier core CPI to come.”

Ranald Mitchell, Director at Charwin Mortgages warned: “The sharp rise in inflation to 2.3% is bad news for the government, complicating hopes of economic stability. With core inflation also ticking up, the Bank of England may be forced to keep interest rates higher for longer, prolonging pain for mortgage holders and homebuyers.”

Daniel Hobbs, Managing Director at New Leaf Distribution described the news as “a real blow to the economy, mortgage holders and bricks and mortar”, adding: “So much for a pre-Christmas rate cut.

“Inflation is on the way up again, quite aggressively too, and that means rates will stay higher for longer. It feels like the whole economy has deteriorated since the Budget.”

Pointing the finger at the Prime Minister and Chancellor Rachel Reeves, Craig Fish, Director at Lodestone Mortgages & Protection added: “Keir Starmer and his team will likely continue to shift blame elsewhere, avoiding accountability as we’ve seen since they took over at No. 10. However, this approach is showing cracks, much like the state of the economy itself.

“The coming year will be a challenging one, with turbulence ahead for both homeowners and the housing market.”

The CPII increase was largely driven by higher household energy costs, following a rise in the energy price cap imposed by regulator Ofgem. The cap increased from £1,568 to £1,717 for a typical dual fuel household in England, Scotland, and Wales, pushing average household energy bills up by £149 a year, or approximately 10%.

ONS chief economist Grant Fitzner noted that this contributed significantly to the inflationary rise, with the higher costs of gas and electricity contrasting with a decline in energy prices during the same period last year.

Other factors also played a role in the inflation increase. Airfares rose sharply, with a 6.6% increase recorded in October compared to the previous month.

However, overall transport inflation was tempered by falling motor fuel prices.

Meanwhile, the cost of raw materials for businesses continued to decline, driven primarily by lower crude oil prices. On the other hand, decreases in recreation and culture expenses, such as live music and theatre ticket prices, provided some offset to the overall inflationary pressure.

The return of inflation above the Bank of England’s 2% target could influence monetary policy decisions. While the central bank recently reduced the base interest rate to 4.75%, further cuts may face scrutiny as policymakers aim to control inflation and stabilise the economy.

The Bank’s efforts to reduce inflation from a peak of 11.1% two years ago have included maintaining high interest rates to dampen consumer and business spending demand, though recent adjustments signal an effort to balance economic pressures.