Interest rate cut hopes were crushed yesterday after a bigger-than-expected rise in inflation to a six-month high – in a blow to millions of borrowers.

The Office for National Statistics (ONS) said inflation climbed to 2.3 per cent in October, its highest level since April – and up from 1.7 per cent the month before.

It is the latest blow to Labour’s stuttering economic performance so far and comes after figures last week showed growth had slowed to a crawl in the party’s first three months in power.

Tory shadow chancellor Mel Stride said: ‘It’s higher inflation and lower growth under Labour.’

Higher inflation will add to the Bank of England’s reluctance to cut its benchmark interest rate, currently at 4.75 per cent. Mortgage rates have risen over recent weeks, as rate cut expectations have been trimmed.

Base rate has so far been cut twice this year but the Bank insists it will take a ‘gradual’ approach to further moves amid fears that inflation pressures could reemerge.

Financial markets now see a less than one in six chance of a cut in December and a little more than 50/50 chance of a reduction at the Bank’s subsequent meeting in February.

It means borrowers could be waiting until March to see any further relief.

> When will interest rates fall again? Latest economists’ forecasts

Rachel Reeves’s Budget has also dented rate cut hopes – as the Bank judges that the Chancellor’s spending plans will drive a further increase in inflation.

The Bank is also waiting to see how much of an impact Labour’s £25 billion national insurance raid will have in pushing up prices, lowering wage growth and reducing employment.

And Donald Trump’s election victory has added to the uncertainty – as his threat to impose swingeing tariffs on imports threatens to spark a global trade war.

Anna Leach, chief economist at the Institute of Directors, said the ‘painful Budget for business’ was adding to inflationary pressures.

‘Inflation is now set to be higher for longer as firms pass through the impact of higher costs into higher prices, and as higher public spending over the next couple of years further generates inflationary pressures,’ she added.

‘Interest rates are likely to come down more slowly, adding to financing costs for both households and businesses, constraining consumption and investment.

‘Unfortunately, while the recent Budget stabilised the public finances, it has undermined growth in the private sector, shattering business confidence and renewing inflationary pressures’.

David Hollingworth, associate director at L&C Mortgages, a broker, said the inflation figures would ‘harden’ the view that the Bank of England interest rate will fall only slowly.

That will feed into the rates offered by lenders on fixed rate mortgage deals – which are linked to the expected path of Bank rate rather than its current level, and represent the majority of home loans.

‘Borrowers will therefore need to remain on their toes, as mortgage deals are still in something of a state of flux and lenders are repricing regularly,’ Mr Hollingworth said.

‘It would be of little surprise if that trend continues and fixed rates are pushed higher on the back of today’s news.’

Yesterday’s figures from the Office for National Statistics (ONS) showed inflation was slightly higher than the 2.2 per cent figure that was expected.

It was largely the result of a 10 per cent rise in the energy price cap from the start of October.

The cap, set by regulator Ofgem lifted typical annual energy bills by £149 to £1,717.Underlying inflation measures ᵴtriƥping out volatile food and energy costs were also worse than feared.

Inflation has fallen sharply from its peak two years ago when it hit 11.1 per cent amid a surge in gas and electricity prices following Russia’s invasion of Ukraine.

But the ONS figures showed that households are still feeling the effects, with gas prices 88 per cent higher and electricity 56 per cent higher than they were in March 2021. And there is little sign of any relief coming soon.

The price cap from January, set to be announced tomorrow (FRIDAY), is expected to see bills go up by a further £19.

The Bank of England expects inflation will continue to climb over coming months, heading close to 3 per cent by the second half of next year. The Bank targets an inflation rate of 2 per cent.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: ‘This month’s unwelcome return above the inflation target is unlikely to be a one-off: inflationary pressures look set to keep prices rising more quickly.

‘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.

‘Darren Jones, chief secretary to the Treasury, said: ‘We know that families across Britain are still struggling with the cost of living.

‘The Government is focused on economic growth and investment so we can make every part of the country better off.’

However, a glimmer of hope was offered to borrowers yesterday by Dave Ramsden, a member of the Bank’s rate-setting Monetary Policy Committee.

Mr Ramsden said inflation could easily come in lower than the Bank is predicting, which would mean ‘less gradual’ rate cuts.

Borrowers who need a mortgage because their current fixed rate deal is ending, or they are buying a home, should explore their options as soon as possible.

Quick mortgage finder links with This is Money’s partner L&C

> Mortgage rates calculator

> Find the right mortgage for you

What if I need to remortgage?

Borrowers should compare rates, speak to a mortgage broker and be prepared to act.

Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it.

Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying expensive arrangement fees.

Keep in mind that by doing this and not clearing the fee on completion, interest will be paid on the fee amount over the entire term of the loan, so this may not be the best option for everyone.

What if I am buying a home?

Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be.

Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people’s borrowing ability and buying power.

How to compare mortgage costs

The best way to compare mortgage costs and find the right deal for you is to speak to a broker.

This is Money has a long-standing partnership with fee-free broker L&C, to provide you with fee-free expert mortgage advice.

Interested in seeing today’s best mortgage rates? Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.

If you’re ready to find your next mortgage, why not use L&C’s online Mortgage Finder. It will search 1,000’s of deals from more than 90 different lenders to discover the best deal for you.

> Find your best mortgage deal with This is Money and L&C

Be aware that rates can change quickly, however, and so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you.

Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage