Inflation Soars: Experts Warn Interest Rates Must Rise

The UK's inflation rate rose to 3.1% in August, exceeding the Bank of England's target of 2%, prompting experts to warn that interest rates will have to rise to keep a lid on rising prices.

Mark Harris, chief executive of mortgage broker SPF Private Clients, believes an interest rate hike is increasingly likely as inflation continues to climb. 'The chance of an interest rate rise, and more, looks increasingly likely' he said.

Harris thinks the Bank of England's rate-setters might delay announcing a rate rise until their November meeting, but warns that higher borrowing costs will soon follow Chancellor Healey's first Budget.

Swap rates have been volatile in recent weeks, causing some lenders to raise mortgage rates. Harris fears that the Bank of England may need to raise interest rates several times to keep inflation under control, pushing up Swap rates and mortgage pricing.