You would expect a certain degree of speculation around increases in Bank Base Rate by the market but perhaps you wouldn’t anticipate it from the Bank of England Governor himself. Yet Mark Carney’s recent assertion that rates will be rising ‘around the turn of this year’ is effectively speculation albeit from a more credible source.
Having suggested such a rise, the big question is what happens if market conditions move in a certain direction to make increasing rates a less credible option? Will the Monetary Policy Committee (MPC) vote to increase rates anyway? I doubt it, and therefore while Carney seems happy to hypothesise on an increase, there is a lot that can happen between now and then to push such a move further into the future.
I understand why Carney and MPC members are speaking in such terms in order to prepare the British public and businesses for an inevitable increase, however is this helpful? Undoubtedly they would like more mortgage borrowers to be on fixed rates in order to guarantee against the payment shock they might get with trackers or discounted rates, but figures from the CML suggest nine out of 10 new mortgages are already taken on a fixed-rate basis so that message is finding its home anyway.
Ironically, of course, it could be those very tracker/discounted rates which are the best option for borrowers, especially if rate rises occur infrequently over the next two to three years and in 25 basis points increments. Again, the CML suggest that such an increase on a typical £120,000 mortgage would only add £15 per month to the payment.
Whatever happens, this represents a prime opportunity for mortgage brokers to tap into borrower concerns about rates and when they might rise. For those borrowers particularly who have been holding off from remortgaging, Carney has cocked the starting pistol and advisers can now tap into, what should be, a growing demand for remortgage advice.
