Inflation may be a world away from its dizzy peak of 29pc in 1973, but it is going up and people will be starting to feel the pinch. The question is: how can people deal with the prospect of rising inflation?
Home owners
Rising inflation raises the prospect of a rise in interest rates - and this is the conundrum for property owners. Should they opt for a fixed rate now or wait? Their dilemma is worsened by the prospect of falling house prices. As prices fall, the amount of equity they have in their home reduces. The difference between having 30pc equity and 10pc equity can be as much as three percentage points on your mortgage rate.An imminent rate rise didn't seem a probability a couple of months ago. But higher-than-expected inflation has put a spanner in the works and now some reckon a rate rise this spring is a distinct possibility. "Swap" - or wholesale - rates have ticked up, suggesting that the market is anticipating a rate rise. Some providers have withdrawn their best deals from the market in recent days.
If it's peace of mind that you are after, then opting for a fix now could be the best move.
"Those who are not so heavily geared [i.e. have plenty of equity] with their mortgage and have sufficient disposable income may find it worth gambling on interest rates staying low," said Mark Harris of Savills Private Finance, the mortgage broker.
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