With interest rates still far lower than inflation, it’s the perfect time to borrow – but it can’t last
You cannot have a situation, or at least not for very long, where interest rates are far below inflation, writes Hamish McRae. Something has got to give
If inflation is running at 3.2 per cent, how come you can get a mortgage at 0.79 per cent? And what on earth does this say about the future trends of prices and interest rates?
The first number is the consumer price index (CPI) for August, announced last week and is the largest-ever monthly increase since the CPI was introduced in 1997. If you want to be even more gloomy, the retail price index (RPI) was up 4.8 per cent. The government does not like using the RPI, but it is still the benchmark against which many contracts are set, including pay deals and index-linked gilts.
The second number is the two-year fixed mortgage rate from the Co-op Bank’s brand Platform, also announced last week. That is the lowest mortgage rate in the UK ever. You do have to pay a fee to get the mortgage, and that obviously brings up the cost. But I can’t find a record of a cheaper mortgage ever in our history.
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