Is Inflation Affecting My Mortgage? | Your Question’s Answered

Hosts: Gemma (WIS)

Guest: Ifthi (Trained accountant, mortgage advisor, and founding director at WIS)

Introduction

Gemma:
Welcome back to our channel and podcast! Here at WIS, we talk about money, mortgages, and positive money mindsets. If that interests you, be sure to subscribe and hit the thumbs up—it helps with the YouTube algorithm and ensures you don’t miss any of our videos.

Today on Let’s Talk Money and Mortgages, we have Ifthi joining us. For those who don’t know, Ifthi is a trained accountant and mortgage advisor with over 11 years of experience in the industry. He is also one of the founding directors at WIS.

Welcome back, Ifthi! How are you today?

Ifthi:
Hi, I’m very well, thank you.

Q&A

1. What is inflation?

Gemma:
Just for everybody watching who might not know, can we start with the basics—what is inflation?

Ifthi:
Sure. Going back to my economics classes, inflation is basically “too little money chasing too many goods.”

For example, if something costs £100 today, and inflation is 10%, next year that same item would cost £110—you can’t buy as much with the same amount of money.

Inflation is usually measured using different indexes, such as the Retail Price Index (RPI). These indexes track the price of a basket of goods—typically 15–20 items—comparing prices year-on-year. If the overall cost goes up by 10%, inflation is 10%.

Currently, we’re seeing clear signs of inflation: electricity and gas prices are up, petrol is more expensive, and even food costs are rising because of transportation.

2. How is inflation affecting the mortgage market?

Gemma:
How is inflation impacting the mortgage market right now?

Ifthi:
Inflation affects the mortgage market in several ways.

Interest Rates: Mortgage interest rates have increased, so borrowing costs more than before.

Bank Assessments: Banks are examining expenses in greater detail. They use finance data to compare your spending with an average person. Even if you’re careful with your money, if the average spend is higher, the bank assumes you spend more and may reduce the amount they’re willing to lend.

For example, if a bank previously approved a £200,000 mortgage, they might now only approve £180,000 because of inflation. This can leave potential homeowners disappointed, even though their salary hasn’t changed.

Some banks incorporate this into their online calculators, showing lower borrowing amounts upfront, while others do it in the background, which can be unpredictable for brokers and clients.

3. Are there other ways banks consider inflation?

Gemma:
Do banks view inflation in other ways, or is that the main factor?

Ifthi:
That’s mainly where the problem lies—people are struggling to borrow what they need.

Sometimes, clients have an existing mortgage but want a new one with a different bank. Due to inflation and affordability checks, they may no longer qualify for the amount they need.

It’s not always about the client’s personal spending—it’s about averages and how banks calculate affordability.

4. How are increasing interest rates affecting mortgages?

Gemma:
How are interest rate increases impacting people taking out mortgages?

Ifthi:
It’s frustrating for many. For example, a client on a 1.2% mortgage deal wanted a cheaper deal without changing the term—but with rates higher now, it’s impossible to match that low rate.

Interest rates have returned to pre-COVID levels and are even higher than many people have seen. New homeowners, especially younger generations, are shocked by these rates.

The Bank of England raises base rates to control inflation, and this impacts mortgage rates in the market. This makes it harder for clients to afford the same mortgages they could previously.

5. Can people protect themselves from inflation and rising mortgage rates?

Gemma:
Is there anything homeowners can do to protect themselves?

Ifthi:
You cannot control inflation or interest rates—they are external factors. However, there are steps you can take:

Plan Ahead:
If your mortgage deal is ending in six months, you can book a mortgage in advance with some banks. This protects you from sudden rate increases.

Variable Rate or Discount Deals:
Some people choose variable or discount rates for a short-term lower rate, instead of fixed rates, which may currently be higher.

It’s always best to speak with an advisor to explore options that suit your circumstances.

Conclusion

Gemma:
Thank you, Ifthi, for sharing your insights. If anyone is unsure about these points, it’s important to speak with an advisor. At WIS, we’re always happy to help—contact details are below.

Reminder: Your mortgage is secured against your home or property; it might be repossessed if you do not keep up with repayments.

Thank you for joining us today! We’ll be back next week with another episode of Let’s Talk Money and Mortgages. Have a great day, stay safe, and see you soon!