The mortgage market started the week with renewed optimism, but Nicholas Mendes, mortgage technical manager at broker John Charcol, has warned that a 0.5% should not be ruled out.
Markets predicted a 0.25% increase on the back of lower-than-expected inflation figures earlier this month.
This led some lenders to reduce mortgage rates after a flurry of rate rises in recent months on the back of money market volatility.
Mendes said: “While markets have priced in a 0.25% rise on Thursday – there are still some sections of the market that feel we could see another 0.5% increase; with the Monetary Policy Committee (MPC) not resting on their laurels following the core inflation decrease a fortnight ago.
“This optimism is slowly being followed by lenders, as we have seen a number make reductions to their fixed rates over the past week.”
He also warned that brokers and consumers must temper their expectations as further rate decreases are likely to come in a trickle rather than a flood, as lenders work to maintain service levels.
He added: “It [is] important to set expectations. Lenders will be stagnating reductions over the next few weeks to ensure that they do not quickly become market leading, thus resulting in an influx of applications and dampening their service levels.
“While mortgage holders approaching the end of their fixed rate may be tempted to hold fire before securing a deal; one thing we can be certain of is you cannot take anything for granted.
“It is still advisable to secure a deal in advance, and regularly review with your broker to ensure you leave plenty of time to switch to a better rate before you deal is due to complete.”
The Bank of England will announce its next interest rate decision this week, on Thursday 3rd August.
