UK inflation increased to 3.5% in the 12 months to April, up from the 2.6% increase in the 12 months to March, according to the Office for National Statistics (ONS).

This “spike” to 3.5% exceeded forecasts according to Mark Harris, CEO at SPF Private Clients, who is concerned about how lenders may react if the Bank of England is less likely to cut rates as a result.

“The most competitively-priced mortgage rates may now have a short shelf life as lenders react to the increase in cost of funds,” said Mark.

“Looking forward, in the longer term base rate is still expected to fall from its current position but the pace at which this happens may now be tempered.”

Taking positives, Black & White Bridging CEO Martyn Smith pointed out that inflation rarely falls in a linear fashion over the long term.

Despite this optimism about the overall direction inflation is heading in, Martyn sees real pressures on developers’ balance sheets in the meantime.

“Renewed pressure on funding costs comes at a challenging time,” he said.

“Developers continue to face tight margins and sluggish planning pipelines, and even small changes in sentiment can make a big difference to project viability.

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“It’s vital that the government doesn’t let short-term volatility derail long-term progress. We need sustained policy support and clear incentives to keep Britain building – because the demand for new housing isn’t going away.”

As well as household goods becoming more expensive, the ONS revealed that house prices had also increased.

The average UK house price increased by 6.4% to £271,000 in the 12 months to March, up from the 5.5% increase recorded the previous month.

However, rents had subsided over this time.

The average UK monthly private rent increased by 7.4% to £1,335 in the 12 months to March, down from the 7.7% recorded the month before.

Alex Upton, managing director at Hampshire Trust Bank, sees this data as reflecting the current housing shortage.

“Propertymark data shows an increase in available stock, but it is not enough to keep pace with tenant enquiries,” said Alex.

“That level of competition means pricing pressure remains firmly upward.”

Richard Harrison, head of mortgages at Atom Bank, also sees house prices continuing to move up and further exacerbating housing shortage challenges.

“The ingredients are there for further house price growth this year and beyond, with the risk of freezing out whole groups of aspiring homeowners, such as those with modest deposits or imperfect credit ratings,” said Richard.

“It’s crucial that lenders ensure these buyers have access to the funding they need to make homeownership achievable, rather than simply a pipedream.”