Experts have suggested that a further rise in mortgage rates “is a nailed-on certainty” as inflation remains high.

The Bank of England is expected to raise the base rate by 0.25 percentage points on Thursday, June 21, taking it to 4.75%, although some critics have suggested that could be even higher by 0.5 percentage points.

Homeowners on variable-rate mortgages linked to the base rate would see an increase in their payments.

A variable mortgage rate is an interest rate which can move up and down at any time, periodically adjusted based on an index

Consumer Prices Index (CPI) inflation remained at 8.7% in May, the same level as in April, according to Office for National Statistics (ONS) figures released on Wednesday.

Bank of England using tool like a 'blunted instrument'

The Bank of England is tasked with keeping inflation as close to 2% as it can but one housing market expert described the tool it is using as a “blunted instrument”.

Said expert, Andrew Montlake, managing director of Coreco mortgage brokers, told PA: “The latest inflation data is set to upset an awful lot of people, leading to a new set of rates rises that will compound the pain of a cost-of-living crisis on the public.”

He said another rise in the Bank of England base rate “is a nailed-on certainty”, adding: “The Bank have one job to do, and it is painfully clear that the tool they are currently using is a blunted instrument against inflation that is now endemic.

“Rather than keep doing the same thing, they should pause for thought and look at a different approach before they inflict real harm in the economy and on people’s livelihoods.”

Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales (ICAEW), said: “While core inflation is proving troublesome, the painful squeeze on consumer spending from soaring mortgage costs and higher taxes should soon put it on a downward path.

“Although another interest rate rise on Thursday looks inescapable, further tightening will do little to address current inflationary pressures and instead risks deepening the financial pain facing people and businesses.”

'The era of cheap money has come to an abrupt and brutal end'

Alice Haine, personal finance analyst at DIY investment platform Bestinvest, said there is “pressure on the Bank of England to push ahead tomorrow with its 13th rate rise since December 2021 with dramatic repercussions in the mortgage market”.

She added: “As the cost-of-living crisis gets overtaken by a cost-of-borrowing crisis, mortgages have taken the lead as the biggest personal finance concern of the moment.

“The era of cheap money has come to an abrupt and brutal end with borrowers now facing repayment levels that are unaffordable for some.

“Financial markets are expecting the Bank of England to increase the base rate by 25 basis points (bps) on Thursday – believing another hike is the only solution to Britain’s persistent inflation problem.

“However, with inflation so sticky there are likely to be calls for a more aggressive hike of 50 bps – something needed if the Bank of England is serious about bringing inflation closer to its target of 2%.

“It’s a delicate balancing act, however, with any further interest rate rises likely to cause more pain for mortgage holders at a time when their finances have only just scraped through a cost-of-living crisis.

“With the average two-year fixed mortgage rate surpassing 6% this week, the fear is that the situation could deteriorate from here if inflation cannot be brought under control, putting even more pressure on the Bank of England to hike rates.”

She said that with the “full force” of mortgage rate rises so far only hitting first-time buyers or those whose fixed-rate deals have expired in the past year or so, “the crunch point will come as more people emerge from two, three and five-year fixed rate deals over the next few months and years.”