Home owners face rate hike
Lenders prepare for expected rise in August
MORTGAGE costs are set to rise, despite the Bank of England freezing rates again yesterday.
Experts predict lenders will begin pushing up the price of home loans in anticipation of a base rate rise by the central bank later this year, potentially as early as August.
The bank voted to hold the rate – which is used to influence wider borrowing costs – at 0.5% for another month. But three of the nine-member Monetary Policy Committee backed an increase including the Bank’s Chief Economist Andy Haldane.
The pound rose against the dollar as a result.
The vote came ahead of a speech by Bank Governor Mark Carney at London’s Mansion House last night.
Economists are split about when rates will rise. On one hand, inflation is still above the Government’s 2% target, with wage growth picking up, normally the basis for an increase. At the same time, the economy has suffered a sharp slowdown, with any rate rise piling pain on individual borrowers and businesses.
Ishaan Malhi, boss of online broker Trussle, said: “Historically we’ve seen lenders begin increasing their rates in the weeks leading up to an anticipated base rate rise.”
And David Hollingworth, of broker L&C, said: “The potential for the rate rise that never came in May saw fixed rates climb. Delaying a decision could see fixed-rate options rise further.”
Others reckon storm clouds over the economy and the Government’s chaotic Brexit talks had torpedoed a rate rise.
Samuel Tombs, of Pantheon Macroeconomics, said: “While it’s not out of the question that the MPC raises rates in August, we continue to expect it to wait until next year.”
But economist Alan Clarke said: “Bottom line: hike! hike! hike – bring on August.”
A rate rise would be welcomed by millions of savers.