We’ve seen many headlines in recent weeks based in and around the question of how will borrowers cope when interest rates begin to rise? Arguably the most noteworthy word in this particular sentence is when. It’s certainly no longer a case of ‘if’.
Its been discussed heavily in the mainstream press in recent weeks and it’s little wonder after warnings that “deep structural problems” in the UK housing market could present the “biggest risk to financial stability” in the UK.
Such comments, whilst not without some validity, have led to speculation over increased BoE intervention within the housing market, inevitably centred on interest rate rises amongst other things.
The reality is expectations of an immediate rate rise have receded somewhat amidst further comments from the governor but borrowers, lenders and the intermediary market can ill-afford to be complacent.
Higher interest rates are coming sooner or later which means questions should also be asked sooner rather than later as to how the mortgage industry will manage these rises and how individual borrowers are going to cope with potentially higher borrowing costs.
The high-profile nature of the aforementioned comments sugges further government and BoE intervention will happen, alongside some gradual interest rate rises. These interventions will come in a variety of guises but it’s vital the mortgage market, the intermediary market and households, whether currently financially stretched or not, are fully aware of any present and future actions.
As such the time is nigh for borrowers to prioritise their mortgage commitments and adjust their budgets and discretionary spending accordingly.
An obvious source of expertise surrounding their mortgage requirements remains the intermediary market. Huge numbers of homeowners who remain vulnerable to interest rate rises could benefit now from securing the right deal. Despite some recent movement regarding headline rates on fixed rate deals, there remain plenty of opportunities for homeowners and intermediaries to benefit from some still very positive market conditions.
Andy Gray is managing director of mortgages at Barclays