Proactive Investors -
- FTSE 100 down 38 points
- Inflation is unchanged at 8.7%
- Interest rates to rise again
Bad news for mortgages
Bad news for anyone with a mortgage following today’s hotter-than expected inflation reading.
“For anyone with a variable mortgage, the likelihood of another rate rise tomorrow means yet more pain,” said Sarah Coles, head of personal finance at Hargreaves Lansdown (LON:HRGV).
“Plenty of those who moved onto a variable deal when their fixed rate expired had expected rates to have started to ease by now, so there’s a growing risk of rises that people hadn’t expected and cannot afford.”
“For anyone looking for a fixed rate, the picture is even bleaker. It has already been a torrid few weeks, as mortgage rates have shot up. The market is pricing in several hikes over the coming months.”
Chancellor Jeremy Hunt delivered further pain, stating that the government will not intervene to help with mortgages.
UK Chancellor Jeremy Hunt says the government will "stick to its guns" after hotter-than-expected inflation data"Rises in interest rates do bring down inflation over time," he adds https://t.co/6eyZrWq1Os pic.twitter.com/wGuNWeeoQS
— Bloomberg UK (@BloombergUK) June 21, 2023
While rising rates have been hell for borrowers, they have certainly been welcomed by savers.
“We have seen an awful lot of this priced in, with the most competitive rates on easy access accounts over 4%, and fixed rates over 5%. Today’s news means we may see rates inch up again as the market prices in higher rates for longer,” Coles added.
FTSE 100 in the red
FTSE 100 didn’t respond well to today’s inflation figures, with London’s blue chips opening 40 points lower, or 0.54%, at 7,528.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said the unchanged inflation figure will have “spooked” the markets.
tWest and Lloyds (LON:LLOY) were among the blue-chips’ largest fallers, down 2.9% to 238p and 2.8% to 43.5p respectively on the back of inflation and rising gilt yields.
Berkeley Group also shed 1.7% to 3,843p.
Despite posting an increase in full-year profits, investors are still seemingly concerned with the plethora of obstacles in the house builder’s way, including inflation and increasing regulation.
Fellow property developers Barratt, Persimmon (LON:PSN) and Taylor Wimpey (LON:TW) all also posted a 2% decrease in share price
Pound remains high despite inflation
Following the CPI data, the British pound held firm around $1.28, staying close to its peak of $1.2848 recorded on June 16.
Hotter-than-expected inflation numbers raised anticipation among investors that the Bank of England would respond to the persistent inflationary pressures by implementing further interest rate hikes.