Commentators say today’s figures are a blow to hopes that mortgage rates could come down further in the short term.
The Bank of England has kept interest rates high in recent years as part of attempts to bring inflation back down to its target of 2%.
Last month it cut interest rates by a quarter percentage point to 4.5% – but further reductions soon now seem unlikely.
Peter Stimson, from lender MPowered Mortgages, said: “Even the most indulgent reader of this data has to admit that hopes of an imminent interest rate cut have been dashed…
“With energy prices set to rise in coming months and employers now barely a month away from the jump in their wage bills triggered by the increase in National Insurance, the potential for inflation to keep rising is significant.
“Against that backdrop, the chances of the Bank of England cutting its base rate again in March have all but evaporated. It will have little choice but to leave rates alone in a bid to get inflation under control.”
David Hollingworth, from L&C Mortgages, agrees the inflation increase was a “bigger jump than many would have anticipated”.
He says: “Today’s data could put some serious drag on any further momentum building for fixed-rate cuts. With margins so tight for lenders, it could at best see fixed rates holding or at worst apply some upward pressure.
“The lowest fixed rate deals could therefore be short-lived”.
However, longer-term, he adds: “Although the hopes for another early base rate cut may ebb away, borrowers should still look forward to interest rates continuing to drop.
“Today’s news will simply raise the same uncertainty and questions around the timing of the next cut and how many more there could be to come this year.”
Nathan Emerson, chief executive of estate agent body Propertymark, is more upbeat.
He says: ”Today’s news may throw many questions into the mix for homebuyers and sellers as they look to make their first or next move, especially given that interest rates have recently started to ease.
“However, it remains positive that mortgage borrowing currently remains lower compared to only twelve months ago, and new and improved mortgage products are continuing to enter the marketplace.”
Daniel Austin, chief executive of lender ASK Partners, says: “The prospect of cheaper mortgages now depends on lenders’ responses to evolving inflation trends.
“While lower base rates typically reduce borrowing costs, persistent inflation could keep fixed mortgage rates elevated, limiting immediate benefits.
“Nonetheless, a more stable rate environment could enhance buyer confidence, especially for those seeking certainty before making long-term financial commitments.”
Sarah Coles, head of personal finance, Hargreaves Lansdown, also says there are “some signs that today’s news may not be the end of the world”.
She adds: “The Bank of England had expected higher inflation, and has said it will go up again later this year without causing any major upsets. It hasn’t materially impacted expectations of rate cuts – so we’re still expecting a couple more cuts later this year – just nothing terribly soon…
“Today’s news could call a halt to the cuts [in mortgage rates] for a while, and might force some lenders to reprice slightly higher, but we’re not expecting a significant shift in rates.”
Before this morning’s inflation figures were published, financial markets estimated there was a 76% chance that the Bank of England would not cut interest rates again next month.
That has now risen to 83%, although investors still expect two further rate cuts later this year.