Stubbornly high inflation may stop the Bank of England from reducing its base rate today, a mortgage expert warns.
Peter Stimson, director of mortgages at Mpowered, says: “When it comes to interest rates, inflation has morphed from a blip into a block. It’s proving worryingly sticky and the crescendo of war drums in the Middle East may make things worse.
“Oil prices spiked 5% on Tuesday – reaching their highest level of 2025 so far – and there’s a danger that they will push up manufacturing and transport costs in coming months, and allow inflation to take root. That’s why the prospects of the Bank of England cutting its base rate again on Thursday – already very slim – have evaporated.”
“The swaps market – which mortgage lenders use to set the interest rates they offer on new loans – is already implying that there will be just one further cut to the base rate this year.”
Inflation eased slightly to 3.4% in May, according to data from the Office for National Statistics. It rose to a 14-month high of 3.5% in April after a raft of bill increases hit households.
The ONS said that an error in vehicle tax data collected meant inflation should have been 3.4% in April, but it has not issued an official revision.
Sarah Coles, head of personal finance at business copnmsultancy Hargreaves’s Lansdown, adds: “The June figures could bring decidedly less welcome news. The spike in energy prices caused by geopolitical instability will feed through into pain at the pumps, and will start to pass through into the costs of producing and transporting all other goods.
“An awful lot will depend on how long higher oil prices endure. A brief blip shouldn’t frighten the horses, but something more prolonged could encourage more caution on cuts.’
More central to the housing market, Nathan Emerson – chief executive of Propertymark – comments on the inflation news: “Although not the drop that many people would have hoped for, especially as we head towards the summer months, which are traditionally the busiest periods of the year for the housing market, we now know that inflation was reported as being 0.1 per cent higher than what was actually the reality for last month, due to a data gathering error.
“All eyes will be on the Bank of England as to whether they reduce the base rates further in response to today’s news, and the changing trends of the international economy. A drop in rates would, of course, further help stimulate the housing market, which is a vital engine of economic growth.”
This article is taken from Landlord Today