Expect mortgage lenders to hike rates in the coming days in response to an impending interest rate increase from the Bank of England (BoE), Moneybox has warned.
The Monetary Policy Committee (MPC) meets tomorrow and is widely expected to increase the base rate by 0.50% – the sharpest increase since February 1995.
Figures published by the BoE last week showed the effective interest rate on new mortgages rose to 2.15% in June, the highest level seen since late 2016.
But while mortgage rates look sure to increase Cecilia Mourain, managing director for homebuying at Moneybox, said any volitility should settle down relatively quickly.
She said: “Lenders will hike mortgage rates straight after a Bank of England rate rise, but we’ve seen that typically they will come down again, ever so slightly, in the following weeks as lenders continue to compete for business.
“In fact, the high certainty of a rate increase tomorrow means some lenders are already hiking rates ahead of the official announcement.
“Since the start of the year we’ve seen lenders pull their popular mortgage deals at short notice, so it’s more important than ever first-time buyers consider working with an informed and trusted broker who can secure the best rate in the shortest timeframe possible.
“The recent succession of base rate rises can seem daunting – especially for first-time buyers – but we need to keep it in context. Rates declined sharply in 2020 and remain in line with the past 10-year average.
“Where possible, aspiring homeowners need to dissociate as much as possible from what’s happening in the very short-term and try to focus on the long-term benefits of home ownership. There will always be periods of recessions and then periods of growth; the key is to be in it for the long-term.”
