The Bank of England has warned that UK inflation could rise to as much as 6.2% in a worst-case scenario, as it held the base rate at 3.75%. The Bank said the Middle East energy price shock could lead to a hike in rates if oil and gas prices remain elevated for longer.
Peter Matejic, chief analyst at the Joseph Rowntree Foundation, said: “The effects of the rising costs and weakening labour market will be felt hardest by households already struggling to make ends meet.” The rate of Consumer Prices Index (CPI) inflation rose to 3.3% in March.
For savers, Clare Stinton of Hargreaves Lansdown noted that the savings environment remains attractive, with easy access cash Isas paying around 4% to 4.5% and fixed-rate deals offering above 4.5%. She advised shopping around for the best rate and using a cash Isa to shield returns from income tax.
Mortgage rates have been volatile, with some lenders reducing rates after an initial jump. David Hollingworth of L&C Mortgages cautioned that the downward trend is gradual and may reverse if market rates rise. Simon Gammon of Knight Frank Finance added that lenders offering competitive rates are quickly inundated and may reprice higher, urging borrowers to lock in deals now.
The gap between tracker and fixed mortgage rates is notably wide, with fixed rates above 4.5% and some trackers below 4%, according to Gammon. Borrowers should consider their financial circumstances and risk appetite.
