A base rate increase is ‘a case of when, not if’, with borrowers seeking to lock in low rates now, Peter Dockar, head of mortgages at HSBC, has warned.
Speaking as the bank launched a range of fixed-rate mortgages, Mr Dockar said: “Existing homeowners are telling us that they would like to take advantage of current low rates, but are put off by the cost and hassle of remortgaging.
“With a base rate increase now a case of when, not if, our new rates will help homeowners to reduce their monthly outgoings with the certainty of a fixed rate.”
Earlier this year, Mark Carney, governor of the Bank of England, suggested that any rate increase would be gradual. However, even a small rise could affect millions, a newsletter from national mortgage firm the Mortgage Advice Bureau has warned.
The newsletter said: “A hike in rates will mean a slight increase in monthly mortgage costs but could also mean getting a better deal on savings rates.”
However, it argued that an increase in rates would peak at 2.5 per cent to 3 per cent, which should come as good news to borrowers.
Following an inflation report in August, Mr Carney announced that pushing back a rate rise to next year was “an expectation not a promise”, a view shared by the MAB.
In August, two out of the nine members of the Monetary Policy Committee voted for a 0.25 per cent rise for the first time since July 2011, sparking debate as to whether a rise was imminent.
However, David Kern, chief economist at the British Chambers of Commerce, argued that the MPC’s decision on 4th September not to raise rates was “the right decision”. Mr Kern said: “While wage pressures are still weak and inflation is below target, calls for early interest rate rises are unjustified”.
Industry view
Sue Anderson, head of member and external relations at the Council of Mortgage Lenders said: “We are not anticipating an increase immediately, but definitely some point in the foreseeable future. From our perspective the crucial thing is to see a market in which consumers are planning ahead for a possible rise, and this has been reflected by new borrowers increasingly attracted to fixed-rate mortgages.”
