UK jobs markets cools but not enough to encourage a summer drop in interest rates
Today’s wage inflation figures make an interest rate cut look even less likely next month.
Wage growth fell only slightly to 5.7% in May from 5.9% in the three months to April, taking it to its lowest level in two years.
Pay rises in all sectors were all above inflation, which was yesterday revealed to be 2% for the second consecutive month.
The smallest wage rises were seen in the construction sector, at 3%, while bankers’ wages increased the most, up 6.7%.
Unemployment didn’t change from 4.4% last month, but available jobs did fall by 32,300, far more than the 23,400 expected, because of fewer vacancies in the retail and hospitality sectors.
What does this all mean?
The fall in headline inflation to 2% over the past two months with a growth in take-home pay, means millions of households should be feeling slightly better off.
But with wage growth remaining fairly strong, and still no firm indicators that 2% inflation is sustainable, economists have cut expectations of an interest rate cut next month to just 40%.
If this is the case, embattled homeowners – 1.5 million of whom need to remortgage this year onto rates nearly double what they’re currently paying – will have to look to September for their first reprieve.
But if a cut is delayed, some economists believe that the BOE will opt for a larger half-point cut, which would make a big difference to repayments on variable-rate mortgages and loans.
What help is available if you can’t afford your mortgage payments?
Mortgage arrears are a priority debt. This means you need to pay them before debts like credit cards.
If you’re in arrears (debt) with your mortgage payments, don’t wait for your lender to contact you.
They’ll normally write to you within 15 days of a missed payment, but you should talk to them as soon as possible.
Under the Mortgage Charter agreed between the government, FCA and major mortgage lenders earlier in the year, you could be offered to:
- Switch to interest only-payments for six months without it affecting your credit score
- Extend your mortgage term without affordability checks
- Take a payment holiday without it affecting your credit score
Lenders can take you to court to repossess your home if you can’t agree a way to pay back the money you owe. But this is a measure of last resort, and they’d rather work with you to find reach an agreement.
If you’re struggling with arrears, we can help. We can work with you to find a debt solution that best meets your individual circumstances. Get in touch if you’d like to discuss what support is available to you.
Caroline Chell
Caroline has worked in financial communications for more than 10 years, writing content on subjects such as pensions, mortgages, loans and credit cards, as well as stockbroking and investment advice.
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