Households feel the impact of a rising Bank rate through higher borrowing costs, but can benefit from more generous savings rates.
Given the global picture, and market expectations of a higher Bank rate, a host of major lenders have already increased the cost of new fixed-rate mortgages in recent days.
Andrew Montlake, chief executive of mortgage broker Coreco, said that the latest data showed that “the inflation dragon has not been fully slain”.
“If inflation proves sticky, lenders’ funding costs stay under pressure, which makes cheaper mortgages harder to deliver,” he said.
“We are already seeing lenders reprice upwards, so this will do little to calm things down. Borrowers should not panic, but anyone approaching the end of a fixed rate should start looking early, secure an option and keep reviewing it.”
The average two-year fixed residential mortgage rate is at its highest since 11 May, at 5.77%, while the average five-year is at its highest since 8 November 2023, at 5.83%, according to financial information service Moneyfacts.
Savers may be offered more generous returns, but the spending power of their savings could be eroded by the rising cost of living.
“It’s almost impossible to time things just right, so I would urge households to focus on what’s best for them now, in the medium term and in the longer term,” said Harriet Guevara, chief savings officer at Nottingham Building Society.
“For savers, regularly check that your savings are earning a competitive return and that you have the right balance between easy access and money you can afford to put away for longer.”