Mortgages.scot

The ONS reports inflation is down from 7.9% to 6.8% a drop of 0.9%. Whilst this is good news there is more caution than optimism at the moment. The reduction is largely due gas and electricity prices falling. But, that is not the entire story which is why there is caution.

Underlying prices

The reason there is caution in the markets is the underlying prices that are going up. When you remove food and energy prices from the the data core inflation was unchanged at 6.9%. Services prices are increasing at a faster rate.

It's also important to note that the drop in energy prices relates more to the reduction in the Ofgem energy price cap than prices in general easing.

Impact on mortgages

This blog isn't really about inflation and I am no expert on it, that said, it's very closely linked to mortgage rates. So the point is how will this continue to impact mortgage rates?

We have seen the BoE continue to use interest rates as a method of controlling inflation. So does that mean an end to interest rate rises? Probably not but maybe. The next MPC meeting where rates are decided is not until 21st Sept 2023. The next release of ONS data relating to inflation is on the 18th Sept 2023.

If there are positives at that time the BoE may hold rates for the first in what seems a long time. What I can predict with absolute certainty is that interest rates are not coming down anytime soon.

So the best we can hope for is a hold on interest rates.

Mortgage rates today

There are some fixed rate mortgage deals out there under 5%. Some examples of the cheapest deals I can see right now.

• 4.9% fixed for 2 years
• 4.85% fixed for 5 years
• 5.04% fixed for 10 years

Discounted and tracker rates are all running slightly higher, significantly in some cases.

Summary

Some good news but treat with caution as inflation is still not as settled as the government and markets want it. Seeing some mortgage rates back under 5% is positive news but a long way from where they were not so long ago when a decent 2-year fixed was under 2%. No expectation rates will be back there anytime soon so I certainly wouldn't be playing a waiting game for it to return there.