Because the current inflation rate “may have a substantial impact” on mortgage applicants, it’s the “best” thing to do.
INFLATION statistics issued this week reveal that the Consumer Price Index (CPI) has risen again again, indicating further bad news for savers. As the rate of inflation in the United Kingdom continues to exceed the Bank of England’s objective, it’s been suggested that now is a good time to look at mortgage options.
Inflation in the United Kingdom reached 2.5 percent in the year to June, according to data released this week by the Office for National Statistics (ONS). This is the highest it’s been in almost three years.
It was the second month in a row that inflation exceeded the Bank of England’s 2% objective.
High inflation has the potential to effect a wide range of financial problems, from what a person may buy with their pension plan to the price of a monthly food store, if it continues to climb.
One of the “single greatest repercussions” of rising inflation, according to personal finance specialists at Money.co.uk, is the change in mortgage payments.
They claim that because of the recent increase, it is now “more crucial than ever” to shop around for the best mortgage deal.
“This is the second month in a row that inflation has increased above target, and if that trend continues, it may have a major impact on anyone presently applying for a mortgage,” said James Andrews, senior personal finance editor at money.co.uk.
“This is due to two key factors.
“The first is that rising inflation tends to be accompanied by rising interest rates, and if the Bank of England acts to bring prices under control by hiking the base rate, it’s almost guaranteed that lenders will pass this on to borrowers in the form of higher mortgage rates.
“The second reason rising prices can damage your mortgage prospects is that banks look at your bills when choosing whether or not to lend to you – and if your costs are taking up more of your salary as a result of price increases, you’re less likely to be offered a deal.”
So, what does Mr Andrews advise future homeowners and remortgagers to do?
“While an increase in costs is inconvenient for potential homeowners, the rate of inflation is uncontrollable,” he said.
“In times like these, the greatest thing you can do is concentrate on what you can control, such as ensuring you obtain the finest offer available, one that is tailored to your specific needs.
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