Inflation set to hit 10.25% in the UK 🇬🇧
Yup, we're starting to feel the pinch here in the UK.
Price rises are more and more noticeable. Aside from the obvious oil and energy price rises, we're starting to see wider hikes in food prices in supermarkets etc. Then there's stuff like construction materials that seem to leap in price week on week.
With a general slow down in the economy (a possible recession looming), it's hard to see how employers are going to be able to pass on the wage rises that people are going to need to live through these changes.
If interest rates continue to rise and mortgage rates continue to rise with them, then you can see property prices starting to fall. This is the worst possible outcome for so many brits who see their homes as a key source of equity and wealth.
That all being said, we need to see some sanity restored to asset prices and so it's a good leveller for the younger folk to get in, but the speed at which these changes could happen may be painful in the short to medium term...
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There is another angle on mortgage prices though. Inflation affects the value of currency. If you put £100 in the bank and keep it there for a year, earning next to zero interest, at 10% inflation you will effectively only have £90 of buying power the following year. You can pass on the same argument to your mortgage. If you owe £100k now, with 10% inflation, in terms of spending power you only owe £90k worth the following year - but it only really works if your income goes up by a corresponding inflationary amount in the year. Personally, I'm unlikely to get a 10% pay rise in the year (which would be nice !), but I am expecting a pay rise increase that will be higher than my mortgage fixed rate interest rate, so to some extent I will get a small gain (however, the price rises in all the other stuff I have to buy wipes it out plus some). However, its an interesting concept, and especially when you consider that house prices appear to continue to rise, so sitting with a mortgage or two at low fixed interest rates for a few years while you have high inflation, in an increasing housing market may not be such a terrible thing.
Spot on. Completely agree. What I meant was those whose mortgage deals run out in the next year or so may be in for a nasty shock if the rates have risen in the latest available deals (compared to what they're used to paying on a monthly basis).
On the flip side, as you point out, it's unlikely that the Bank of England will have the balls to tackle inflation by increasing interest rates too much so inflation is likely to outstrip most folk's mortgage interest rates - win win!
Aye true - I guess I'm lucky, currently locked in at a low rate until 2024 or 2025 !
!PIZZA
Me too ;)
and how to what is due this increase in inflation in your friendly country. I thought that because it was a country, these problems of inflation were seen very little, but I see that it is a global problem and not of a particular region.
Yes, it's spreading...
but is there any particular factor that can cause that inflation in your economy