The bigger than expected inflation rate rise in November – up from 1.7 per cent to 2.3 per cent – has killed hopes of a Bank of England cut in the base rate in December, according to finance experts.

At the same time City markets are now betting that a fall in the base rate, which is currently 4.75 percent, will be smaller and slower through 2025 than previously expected.

The news will be a blow to home buyers and people looking to remortgage who will face higher monthly repayment costs than might have been expected.

An increase in energy prices in October and a further one due in January are the main factors leading to higher inflation; however, budget tax rises are also predicted to cause a higher rate of CPI inflation than would otherwise have been the case.

Head of personal finance at Hargreaves Lansdown, Sarah Coles, said: “Like parents of a toddler on the brink of walking, mortgage borrowers on tracker rates are used to building their hopes up, only to have them dashed by an unwelcome obstacle.

“November’s interest rate cut might have raised expectations that more cuts could be on the way, but inflation looks set to get in the way again.”

She added: “For those looking for a new fixed rate, or with a remortgage looming, inflation is even more likely to trip them up.

“Rates have already been rising. Moneyfacts puts the average 2-year fix at 5.52 percent – up from 5.41 percent a month earlier. Given that the Bank of England doesn’t expect stubborn inflation to hit the target any time soon, we’re likely to see higher rates continue to be priced into mortgages for the rest of 2024.”

John Choong, Head of Equities and Markets at Investors Edge, said: “Today’s CPI data effectively closes the door on a December rate cut.

“And while lower fuel prices had offered a glimmer of hope that could help offset some of the inflationary pressures from the higher energy price cap and food prices, mounting geopolitical tensions and rising crude prices suggest higher fuel prices instead.”

Emma Jones, Managing Director at Whenthebanksaysno.co.uk, told Newspage: “This is not the news anyone with a mortgage wanted to see.

“There’s every prospect lenders will now continue to hike rates and a base rate cut in December is almost certainly off the table. There was such optimism just a month or so ago and now it feels like the walls are closing in.”

Earlier this year, City markets were predicting the base rate would come down by a full 1 percentage point, taking it down to 3.75 percent by Christmas 2025. However, concerns about higher inflation means a lower 0.6 percentage point cut is now considered most likely.

The net effect is that tracker rate mortgages and new fixed rate mortgages will be higher than otherwise might have been the case.

Kelsey Phillips, Head of Specialist Lending at Arose Finance, said: “We could see marginally higher mortgage rates and the Bank of England cutting more cautiously than previously anticipated, leaving a December base rate cut unlikely.”

Daniel Hobbs, Managing Director at New Leaf Distribution, said: “So much for a pre-Christmas rate cut. This is a real blow to the economy, mortgage holders and bricks and mortar. Inflation is on the way up again, quite aggressively too, and that means rates will stay higher for longer. It feels like the whole economy has deteriorated since the Budget.”

Ranald Mitchell, Director at Charwin Mortgages commented: “The sharp rise in inflation to 2.3% is bad news for the government, complicating hopes of economic stability. With core inflation also ticking up, the Bank of England may be forced to keep interest rates higher for longer, prolonging pain for mortgage holders and homebuyers.”

Looking ahead, Michelle Lawson, Director at Lawson Financial, said: “Stand by for mortgage rates to keep increasing and a base rate hold in December. Inflation will go up again due to the recent Budget.”