Homeowners are being warned that they “shouldn’t rule out” another hike to interest rates from the Bank of England.
Mortgage repayments have increased substantially in the past year in the wake of a series of rate rises from the financial institution.
Next week, the central bank’s Monetary Policy Committee (MPC) will meet to discuss further changes to the base rate.
As it stands, the Bank of England’s base rate is at five percent and has been raised to mitigate the impact of inflation on the economy.
One of the consequences of the Bank’s decision is that mortgage and debt repayment have been raised to the detriment of millions of homeowners.
He explained: “Welcome news on UK inflation has taken a fair amount of pressure off the Bank of England to repeat the 50 basis point rate hike it implemented in June.
“Services inflation, a key metric for the Bank, dipped back in June’s data, against BoE expectations for it to remain unchanged. That was complimented by better news in other areas, including food.
“Admittedly this improved story on inflation was tempered by a recent upside surprise to pay growth, but that too was offset by further signs of cooling in the jobs market and an ongoing return of workers.
“We shouldn’t rule out a 50 basis point hike though, especially if the committee concludes they think they’ll hike again in September.”
According to the economist, markets have downgraded their initial predictions as how far the base rate would be raised to.
Mr Smith added: “At the peak, investors thought rates could go as high as 6.5 percent. Now, it’s a little more than 5.75 percent, which implies three more 25 basis point rate hikes from the current five percent level.
“That seems fair, and while our formal forecast peaks a little below that at 5.5% percent we acknowledge this is wholly dependent on further progress on services inflation and wages.”
The Bank of England’s MPC will announce further potential changes to the base rate on Thursday, August 3.