Mortgage rates rise in the UK after inflation surprise

Mortgage costs in the UK are rising after higher-than-anticipated inflation figures, leading to revised forecasts for interest rate hikes. The Nationwide building society announced that mortgage rates on new fixed deals would climb by up to 0.45 percentage points. Halifax and Lloyds Bank have also raised their rates this week.

The rise in mortgage costs comes amid expectations that the Bank of England will need to raise interest rates more significantly than previously anticipated in order to curb the pace of price increases. 

Chancellor Jeremy Hunt expressed his support for an increase, even if it risked pushing the country into recession, as long as it addressed rising prices and soaring inflation. Speaking to Sky News Hunt emphasised that reducing high prices, which are fuelling the cost of living crisis, was the only path to sustainable economic growth. 

Earlier indications suggested that rates were nearing their peak. However, recent official data revealed that UK inflation slowed to 8.7% in April, a decrease that fell short of expectations. As a result, markets now anticipate that the Bank will raise rates from their current level of 4.5% to as high as 5.5%.