The Bank of England made the right call upping interest rates to 0.25% today in light of recent increases in inflation, Kate Davies (pictured) of IMLA has said.
She added that this was also likely to see a boost in demand for mortgage adviser services as borrowers assess their property finance needs.
UK inflation soared to its highest level in more than a decade last month, climbing to 5.1%, according to the Office for National Statistics.
This was significantly more than the Bank of England’s 2% target and well above the expectations of 4.5%, thanks to the rising cost of clothing, fuel and second-hand cars.
Davies, executive director, IMLA, said: “Today’s decision by the Bank of England will have come as a surprise to many, with popular opinion expecting the Bank to put off the increase until after the festive period.
“However, the decision feels like a proportionate and appropriate response to recent rises in inflation and in truth the effect on the mortgage market may remain minor in the short term. With so many borrowers currently on fixed term mortgages and rates still remarkably low, we likely won’t see the effect of today’s decision until we are firmly into 2022.
“A key concern will be the effect of this decision on vulnerable borrowers, who are more exposed to the consequences of rising rates. However, a recent IMLA research report into underserved borrowers found that lenders are increasingly adapting their product ranges and criteria to better suit the needs of those who traditionally find it harder to access lending.
“More than nine in 10 lenders (92%) surveyed in the same research agreed that using an independent mortgage adviser would provide non-standard borrowers with more product choice.
“It is therefore key that consumers continue to seek the guidance of an adviser as we see rates start to rise to ensure that today’s hike does not undermine the progress the industry has made in catering to a wider borrower cohort.”
