Why are rates going up?

This is despite the inflation rate falling back from 10.1% in the 12 months to March, to 8.7% in April – the first time in eight months it has recorded single digits.

Gary Smith, partner in financial planning at wealth manager Evelyn Partners, said: “Our investment strategy team noted that market peak rate expectations surged after the inflation reading, with traders now expecting the Bank of England to nudge rates up to 5.5% rather than the previous forecast of 5.0%. That surely scotches any idea that we might be seeing peak mortgage rates now or that they might come down in the near future.

Danni Hewson, head of financial analysis at AJ Bell, agreed with that assessment, saying: “Looking at market expectation this morning it seems there’s speculation the Bank of England might go as high as a 5.5% base rate in order to complete its task.

“Wages have risen, even if most people haven’t felt the benefit because of those price hikes, and businesses will have to find a way to recoup those increases if they haven’t already passed the costs onto their customers.”

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And Susannah Streeter, head of money and markets, Hargreaves Lansdown was more colourful in her language but no less gloomy in her outlook for base rates.

She said: “Another rate rise may have the effect of a herd of rhinos trampling over an economy, which is only just seeing some green shoots appearing as the forecast recession recedes. But policymakers don’t have many other strategies to deploy right now to herd inflation in the right direction.”