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Gloucestershire Business News

More on mortgage spells less on going out?

Mortgage costs are rising after higher-than-expected inflation figures this week raised forecasts of how much UK interest rates will go up.

A range of lenders are in the process of increasing the cost of new deals, with Nationwide – the most significant lender – today increasing deals by up 0.45%.

Today's news, and the the knock-on effect from householders having to ringfence income to cover the cost of the roof over their heads, is likely to be a new setback for small businesses in Gloucestershire, particularly those with a stake in entertainment and eating out.

The news is not, however, a suprise: back in January, the Office for National Statistics (ONS) said that with the beginning of Bank of England rates rising during 2022, the move was "likely to make borrowing more expensive for those with fixed rates deals coming to an end in 2023".

The ONS added: "Those with variable rate mortgages and private renters are also facing higher housing costs.

One café owner in Gloucestershire who asked not to be named told Punchline the economics with this week's rise, were "brutal".

He said: "If you come off a fixed-rate deal into today's harsh choices, so many of the little daily choices you might make are suddenly killed off. Unfortunately, that includes spending on coffee and cake here. We won't be surprised if a lot of our regular customers disappear."

Official figures showed UK inflation for April slowed by less than expected, to 8.7%, with core inflation - which discounts factors such as food and energy, standing at a 31-year high.

And the pain may well increase: market expectation is for the Bank of England having to raise rates above their current level of 4.5% to as high as 5.5%.

The Federation of Small Businesses (FSB) said today's mortgage rise is going to hurt.

Sam Holliday FSB Development Manager for Gloucestershire, said: "In the week our latest FSB survey showed that confidence was slowly climbing again among SMEs in the South West, there is no doubt that the news that mortgage rates are going up again will lead to fresh fears of new interest rate rises, which will clearly hurt many businesses.

"Coupled with the fact that the fall in inflation announced yesterday was much more modest than had been hoped for it proves that the seemingly relentless attack on SME bottom lines shows little sign of abating in the near future."

However, Mr Holliday added a note of optimism: "There is better news out there for business as we can all see when we visit petrol stations and hear that energy price rises are stabilising, so we can only hope that interest rates and inflation can eventually start heading in the right direction, too. It is essential they do if we want to build on the cautious return to positivity that we have finally started to see this spring."

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