1 in 3 brokers say interest rates will rise this year

Photo:   James Stringer

The Bank of England decided today to hold rates at the record low of 0.5 per cent for at least one more month. Nonetheless, speculation remains rife surrounding the possibility of a rate hike in the near future, as the UK economy recovers.

Indeed, 36 per cent of mortgage brokers expect a rise in the Bank of England base rate before the year is out, according to new research by the Intermediary Mortgage Lenders Association (IMLA).

Opinion is divided in the mortgage industry on the widely anticipated rate rise, though, with just 17 per cent of lenders anticipating a hike during 2014.

The consensus among lenders, rather, is that the Bank of England will raise its base rate from 0.5 per cent in the first half of 2015, for the first time since March 2009. Nearly three in four take this view including nearly half (44 per cent) who expect to see a rise in Q1 2015. There is a greater split among brokers, with 44 per cent predicting the rise will come in the first half of 2015 while one in five (20 per cent) expect the 0.5% base rate will survive past the middle of next year.

IMLA’s research also reveals diverging opinions across the mortgage industry about which group of borrowers will be most affected when the interest rate rise finally occurs.

The majority view among lenders (56 per cent) is that existing homeowners will be the most affected demographic, followed by aspiring first time buyers (28 per cent take this view). Just one in 10 believe recent first time buyers will feel the biggest impact.

By comparison brokers expect recent first time buyers and existing homeowners will share the brunt of the interest rate rise, ahead of aspiring first time buyers. Both lenders and brokers agree that buy-to-let owners and landlords will be least affected by the eventual base rate rise.

Peter Williams, Executive Director for IMLA, commented: “The prospect of a rise in interest rates has been looming on the horizon for some time, but now it appears an increase is hovering closely overhead. The majority view across the mortgage industry is that a rise in 2015 still looks to be the most likely outcome. But it won’t be long before the consensus is challenged within the MPC, and speculation over an early rise has clearly registered with a significant number of brokers.”