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How to navigate the mortgage market when rates are rising

Sponsored by Rose Capital Partners
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With interest rates looking set to rise, what does it mean for the mortgage market?

 

Recent events in both financial markets and the wider economy mean that interest rates look set to rise sooner than expected.

 

A fall in unemployment from 4.6 per cent of the working population in August to 4.5 per cent in September – according to official Office for National Statistics (ONS) data – would not normally be noteworthy. We saw the furlough scheme come to an end in September and the Bank of England had concerns we would see a spike in unemployment, but that has not materialised. The ONS also expects wage inflation to continue. Wages were up 7.2 per cent in Q3 2021 vs Q3 2020 and predicted to rise between 4.1 per cent and 5.6 per cent in Q4 2021 vs Q4 2020.

 

Inflation doesn’t look to be going away anytime soon. Even with a surprise downturn to 3.1 per cent in September vs 3.2 per cent in August, it is still more than 50 per cent above the target level of 2 per cent set by the Bank of England. In October, we saw real issues around fuel supply, energy prices and supply chain issues, so inflation may well hit 5 per cent before it starts to peg back. Andrew Bailey, Governor of the Bank of England, was quoted as saying it “will have to act” over rising inflation, which was a very clear reference it intends to raise the base rate up from its current level of 0.1 per cent.

 

Money markets had already started to shift in September as much of this data started to filter through.

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by Richard Campo, Founder, Rose Capital Partners

Sponsored by Rose Capital Partners
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