Pressure on mortgages as inflation rises

As inflation rises to 4 per cent, Economics Editor Faisal Islam says an interest rate increase is likely in the next four or five months.

Link to the article: Channel 4 News

A rise would mean higher mortgage costs for millions of people who are not on fixed rate deals, as well as increased borrowing costs for businesses.

As expected, the Government's preferred measure of inflation - the consumer prices index (CPI) - rose from 3.7 to 4 per cent last month.

The increase has been attributed to a rise in the cost of oil and the decision to raise VAT from 17.5 to 20 per cent.

The Bank of England's base rate is at an historic low of 0.5 per cent, but with inflation at its highest level since November 2008, the Bank's Monetary Policy Committee (MPC) may be forced to increase it for the first time in two years.