UK Interest Rates - Base rate remains unchanged for two years, but...
Base rate remains unchanged for two years, but property owners must review borrowing arrangements now as rates will inevitably rise soon, says Knight Frank Finance
This morning’s decision by the Bank of England’s Monetary Policy Committee (MPC) to keep the base rate on hold at 0.5% for a full two years should not lull borrowers into a false sense of security as rates will rise soon, says Simon Gammon, head of Knight Frank Finance, which specialises in mortgages over £1m.
“In February three members of the committee voted to raise rates, and I would not be surprised if that number had increased further when we get the minutes of this month’s meeting. The MPC has nine members so it would only take a small swing in sentiment for those voting for a rise to be in the majority.
“Although there is a feeling that lenders have already factored an increase in the base rate into their own rates, I would not take that for granted. As soon as rates do rise there will be a rush to lock into longer-term fixed rates before any further increases. This will inevitably lead to the best deals disappearing quickly and, from a purely commercial view, will allow lenders to increase their margins.
“The average five-year fix has already edged up to about 5.5%, almost 200 basis points higher than the markets low point of around 3.7%.
“Some products currently available do allow borrowers to switch from a variable rate to a fixed rate in the future without incurring a redemption fee or further costs, but there is no guarantee that the fixed rates on offer then will be the most competitive.
“Now is absolutely the time to take expert advice and review your borrowing arrangements, I think this is just the start. There is likely to be a rush for longer-term, fixed products and the best deals will not be around for long. The lenders offering the most favourable rates will be deluged with applications meaning service levels could also slip and customers may not get the rate they were hoping for.
“Because Knight Frank Finance has direct access to lenders we can ensure applications are processed more quickly than using a bank’s branch network. We can also advise clients which lenders are most likely to offer the best service.
“Knight Frank Finance also has access to private banks not available to the majority of mortgage brokers. This means it can create very innovative mortgage products if needed. One of the advantages of using Knight Frank Finance is that we can offer products that are unique to every borrower’s individual situation and their appetite for risk or desire for peace of mind.”
Courtesy: Knight Frank
For further information, please contact:
Rosie Cade, Residential PR Manager, Knight Frank,
Tel: +44 (0)20 7861 1068,
Email: [email protected]