FAMILIES should expect interest rates to rise in November, pushing up the cost of mortgage and debt repayments, after inflation hit its highest level in more than five years, experts warned
The cost of living hit three per cent in September, the highest level since March 2012, as measured by the Consumer Prices Index.
Higher inflation increases pressure on household budgets, as everyday price increases squeezes the spending power of ordinary families.
The Bank of England is tasked with keeping inflation running at two per cent, and Governor Mark Carney will now be forced to write a letter to the Chancellor explaining why the cost of living is well above target.
Raising interest rates can scale back inflation - and the latest figures have increased expectations the Bank of England will now hike rates from the current level of 0.25 per cent at the next policymaker meeting in November.
The move would mean higher mortgage repayment rates but saving rates would also likely increase - providing help to people trying to take make a return from cash.
Calum Bennie, Scottish Friendly’s savings specialist said: “Interest rates have to rise to help tackle inflation and the sooner this happens, the better.
"Mark Carney must recognise the wolves are now at the door and take action to strengthen the pound even though this may increase mortgage costs.
"Consumers have been dealt a double blow of poor income growth and rising shop prices over the past year."
Homeowners have now been urged to lock in low rate mortgage deals sooner rather than later.
Alistair Wilson, head of retail platform strategy at Zurich, said: “As inflation hits a five-year high and outstripping pay growth, further pressure is on the Bank of England to raise interest rates – now even more likely to be next month.
"This will be welcome relief for savers, but homeowners with variable and base rate tracker mortgages need to pay attention now if they haven’t done so yet: a rates hike will be a shock if unprepared for.
"Some lenders have already started pulling their record low mortgage deals, so prospective borrowers should try and take advantage now, and those already making repayments need to check what level of interest they’re paying and whether they could save money by switching to one of the more competitive deals on the market."