UK wages have risen at their fastest rate in 20 years, excluding the pandemic, raising expectations that UK interest rates will have to rise.
Regular pay excluding bonuses increased by 7.2% in the three months to April, although it still lags behind inflation – the rate at which prices rise.
The Bank of England has warned big pay rises are contributing to the UK’s still-high rates of inflation.
It has put up interest rates 12 times since 2021 to try to slow price rises.
Higher interest rates may be good for savers, but are driving up repayment costs for millions of mortgage holders.
And fears the Bank of England will raise interest rates higher than previously thought – from their current 4.5% to as high as 5.5% – have been causing turbulence in the mortgage market.
Lenders have been putting up rates and pulling hundreds of deals, causing uncertainty for borrowers.
On Tuesday, the government’s borrowing costs – which directly impact mortgage rates – rose to their highest rate since last year’s mini-budget.
Samuel Tombs, chief UK economist at Pantheon Economics, said the renewed pick-up in wage growth would “add fuel” to expectations for higher interest rates.
This was because the figures were”fanning the impression that the UK has a unique problem with ingrained high inflation”.
Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), said in cash terms, basic pay is now growing at its fastest since current records began, apart from the period when the figures “were distorted by the pandemic”.
“However, even so, wage rises continue to lag behind inflation.”
According to the ONS, pay when adjusted for inflation fell by 1.3% in the three months to April.