Rates Are On the Way Up: What this Means for Dealers?

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Inflation Rates

In light of the bleak outlook for inflation, the City’s biggest investment banks have raised their expectations for an interest rate hike this week. This is likely to lead to an increase in the cost of money which will see consumer APR’s increasing over the coming months.

They forecast a 0.15 percent rise, or 15 basis points in City speak, arguing that the Bank is likely to lower its growth forecasts for the UK economy and warn that labour shortages and the supply-chain crisis will drive up prices.


Inflation appears to have worsened recently (see below), prompting Bank governor Andrew Bailey and economist Huw Pill to discuss their collaboration publicly.

The Pandemic Effects

Mortgage companies have already started scrapping their best deals in anticipation of a Bank rate hike, with typical two-year fixed deals expected to rise from around 1% to 2% in the coming months, according to brokers. At a time when household bills are rising, this would add more than £1,000 per year to the cost of a £200,000 mortgage.

We have seen some auto finance lenders already start to implement an increase with the commercial funders (who typically operate in the mortgage sector too) enhance from the 1st November with 0.45% increase immediately and talk of future hikes too.

“We now expect the MPC to deliver its first post-pandemic rate hike — 15 basis points,” Deutsche said in a note to clients.

Some banks, such as Nomura, believe the Bank will hold off on raising rates until December, but Nomura along with the majority of other finance institutions predicts that borrowing costs will continue to rise next year, reaching 1% by the end of 2022.

“We at the Bank of England have signaled… that we will have to act,” Bailey has said.

Watch this space, but also be prepared as it is likely lenders and brokers will be discussing these changes imminently…

Solutions for your most prestigious clients

DSG Prestige has decades of experience working with high-net-worth individuals. These customers require a degree of discretion and confidentiality around sensitive financial information, which is where our Concierge Service comes in. We can liaise with these clients directly on your behalf, providing you with a specialist service that will help to secure you extra car and finance sales.

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