April 23rd, 2015
Minutes of this month’s meeting of the Monetary Policy Committee at the Bank of England have shown a change in attitude of committee members towards a rate increase.
All nine members voted to keep Base Rate at 0.5%, with all agreeing that it is ‘more likely than not’ that the Base Rate would increase over the next three years. Two members of the MPC said that their vote was ‘finely balanced’.
It is a distinct change from the same discussions over the past twelve months, where traditionally two of nine committee members have been in favour of a small increase.
Samuel Tombs, Capital Economics senior UK economist says: “With CPI inflation unlikely to approach the 2 per cent target until well into 2016 and productivity primed for a recovery, we think there will be little pressure on the MPC to raise rates this year.”
This all adds up to a volatile time for mortgage borrowers. Whilst this week has seen the introduction of the lowest 5yr fixed rate ever, with HSBC’s 1.99% product, and with many brokers predicting other lenders will soon follow suit; with the next General Election, and a possibly change of Government, looming large, it is a risk to play the waiting game.
“At present rates are amongst the lowest around which is clearly fantastic news for mortgage borrowers” said Taj Kang, Business Development Director of Contractor Mortgages Made Easy. “Sainsbury’s Bank has also brought in consultants to assess the mortgage market ahead of a predicted entry, so it would seem at least that rates will continue to be competitive for a time yet.”
“There is, however, also a risk given that the financial outlook for Britain could change in the coming weeks, that lenders are trying to curry favour and win business now, so that they can adjust to any change in government by trimming back their mortgage lending next month. This is a distinct possibility.”
With lenders constantly reassessing mortgage products, brokers are seldom given more than a few hours’ notice of any impending rate increases or withdrawals. That, according to Taj, means that there is a need to be prepared.
“We’ve seen a continued slowing of lender processing timescales since this time last year and the Mortgage Market Review, with some lenders now refusing to book mortgage valuations until underwriting is complete. With that in mind, it would pay to be ahead of the game and have a broker working for you who can ensure that you get the best product available, and that you don’t miss the boat, as a new ticket could prove costly.”
Article By: Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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