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Landlords Advised to Lock in Mortgage Rates After Latest Inflation Figures

In the wake of recent inflation updates, MFB, a specialist buy-to-let broker, is advising landlords nearing the end of their mortgage deals to lock in new rates without delay.

The Office for National Statistics (ONS) recently released the Consumer Price Index (CPI) statistics for July 2023. The data indicates that inflation for the month stood at 6.8%, a decrease from June’s figure of 7.9%.

Gavin Richardson, Managing Director of MFB, expressed his expectations on the trajectory of inflation. He remarked, “The remainder of 2023 will likely see a continued drop in the overall inflation rate, mainly due to declining energy prices. I anticipate inflation dipping to around 5% by the year’s end.”

Richardson went on to note the upcoming plans of the Bank of England. “The Bank is poised to increase the Base Rate in September, possibly by another 0.25%. If you’re nearing the time to remortgage, I advise locking in a new rate promptly. For certain lenders, you can do this up to six months prior to the termination of your Early Repayment Charge period. If mortgage interest rates fall further, many lenders offer the flexibility to transition to a more competitive product before finalising the deal. This ensures both financial stability and the reassurance of having a mortgage that aligns with your financial situation.”

“For those on a tracker or variable mortgage linked to the Base Rate, it’s prudent to consider a fixed-rate agreement before the upcoming Monetary Policy Committee (MPC) meeting. If you hold off, you could face higher mortgage repayments in line with the projected Base Rate increase. Consulting a broker about fixed-rate options could reveal potential savings on your monthly repayments.”

Recalling the recent history of inflation, it peaked last October, coinciding with the Truss-Kwarteng mini-budget debacle, reaching a high of 11.1%. Swift amendments by Jeremy Hunt played a pivotal role in moderating inflation, stabilising mortgage interest rates, and reinstating faith in the financial markets.

The drop in inflation in June to 7.9%, down from 8.7% in May, marked the lowest since March 2022. Notwithstanding the decrease in inflation, the sustained upsurge in prices and earnings necessitated a Bank of England Base Rate hike earlier this month.

MFB highlighted that the recent inflation data would be crucial for the MPC when it reconvenes to reconsider the Base Rate on 21st September. Notably, the MPC has ratcheted up the Base Rate fourteen times in succession, elevating it from a historic low of 0.1% in December 2021 to the current 5.25%.

In his final remarks, Richardson said, “As long as inflation continues the same downward trajectory though, we forecast the next rise will be the final increase this year.”