Home loans to rise after BOE ‘mess’

MORTGAGE costs are likely to rise because the Bank of England “messed up” on inflation and remains behind the curve on interest rate rises, says Bank of America.

Alastair Ryan, an analyst at the Wall Street bank, blamed a recent rise in so- called swap rates, used to price fixed-rate mortgages, on the Bank’s credibility being “diminished” among investors. In a note to clients, Bofa said average mortgage rates were now more t han a percentage point below their recent peak.

However, Mr Ryan said swap rates, which reflect bets on where interest rates will be in the future, were likely to “move higher again”.

Mr Ryan added in an interview that investors were starting to question Threadneedle Street’s message that inflation will fall sharply this year and drop back towards the central bank’s 2pc target.

He said i nterest rates, which have climbed from 0.1pc in November 2021 to 4pc over the past year “may well need to go meaningfully higher, because the Bank of England has messed up inflation profoundly”.

Coventry, one of the UK’S biggest building societies, announced it would be increasing its fixed-rate deals from next week.