March inflation data & what this means for mortgage rates – Insights from our senior broker Anuj Chulani
Last week the latest UK inflation data for March was released, showing an increase to 3.3%, up from 3.0% in February.
This rise was widely anticipated by analysts and has been largely driven by higher fuel costs. The biggest increase in over three years – alongside upward pressure from airfares, food, and transport. Ongoing geopolitical tensions in the Middle East have contributed to rising oil and gas prices, which continue to feed into overall inflation.
While this is a setback compared to earlier expectations of inflation falling to 2% by April, it’s important to keep this in perspective. Inflation remains significantly below the peak of 11.1% seen in 2022 following the escalation of the Russia-Ukraine conflict.
Crucially, the increase to 3.3% was in line with market expectations. Historically, when inflation exceeds forecasts, we tend to see sharp movements in swap rates. The fact that this figure met expectations should help avoid immediate upward pressure on these rates.
For context, inflation measures how quickly prices are rising over time. When inflation increases, it means the cost of goods and services is rising at a faster pace. The Bank of England aims to keep inflation at around 2% to maintain economic stability.
There are some encouraging signs. Oil prices have shown signs of easing in recent weeks, and there is growing optimism that inflation may peak between 3.5% and 4% this year. While this likely rules out further base rate cuts in 2026, it also suggests that significant increases are unlikely, indicating a more stable outlook.
This evolving landscape is influencing mortgage advice. We are currently having more conversations with clients about tracker rate products, which are often priced lower than fixed-rate options. However, these are not suitable for everyone, and it remains essential to assess all options carefully based on individual circumstances.
At present, 1-5 year swap rates continue to hover around 4%, which is why fixed mortgage rates remain above this level. We remain hopeful that as swap rates stabilise, we may see a gradual reduction in mortgage rates as we move into the second half of the year.
As always, the market is subject to daily changes, making it more important than ever to stay in close contact with your mortgage adviser – particularly if you are considering purchasing a property or refinancing.
If you would like to discuss your options or need tailored advice, please don’t hesitate to get in touch with the team at Hirschle Hughes
