Today, the Bank of England’s Monetary Policy Committee raised the bank rate by 0.5 per cent, putting it at 1.75 per cent. This is the highest the base rate has been since December 2008 during the financial crisis, and the largest increase for 27 years.
Andy Sommerville, director at property data provider Search Acumen, said this would increase the workload for property lawyers as transacting parties would look for quick resolutions to protect themselves from further rate rises.
He said: “Many homebuyers stuck in the transaction logjam face a ticking clock to complete before their mortgage offer expires, as we wave goodbye to our historic era of low rates for good.
“This will increase an already monumental workload for conveyancers, putting pressure on our cumbersome property transaction process which reached a record 153 days in June, compared with 124 days pre-pandemic.”
He added: “Our transaction backlog is reflective of an archaic property purchasing system that is simply no longer fit for purpose, hastily exposed by the effects of lockdown. Rapidly increasing fall-throughs indicate a pressure-cooker moment for the market. Conveyancers need to lock in and understand short-term market pressures whilst adopting greater efficiencies through digitalisation to be able to cope with sustained market activity.”
Sommerville said smaller levels of house price growth suggested the property boom was levelling out but suggested it was unlikely rates would rise enough to deter buyer demand and ensure “lawyer’s caseloads are replenished as quickly as they can clear them”.
He added: “We are in a period of history defined by the greatest change in spatial needs for a generation. All of these characteristics create a property market that remains underpinned by demand and likely to remain highly active for the foreseeable future, outside of the usual seasonal, or portfolio management cycles.”
Time is of the essence
Emma Hollingworth, distribution director at MPowered Mortgages, said the base rate increase “may impact appetite to some extent but the housing market has proved incredibly resilient and demand is expected to remain strong”.
She added: “What will be more important than ever now is the speed at which mortgages can be processed. Time really is of the essence.
“With current economic trends likely to continue for the foreseeable future, it is key that brokers offer their clients a mortgage journey that allows them to secure a mortgage as quickly and efficiently as possible, before rates move again.”
Mark Harris, chief executive of SPF Private Clients, said lenders would also act to alleviate the impact on business.
He added: “Lenders repricing upwards is not always entirely a response to a change in the cost of funds but a defensive mechanism to preserve service levels. If banks feel they are being inundated with business and might struggle to cope, they may edge rates up slightly to make them less attractive to borrowers.”
HSBC is one example, as the bank announced rate increases of up to 0.55 per cent last night which led to brokers rushing to secure outgoing deals. Saffron and Coventry Building Societies have also tried to manage service levels by temporarily pausing mortgage applications for new borrowers. Earlier this week, Cambridge Building Society also pulled back on business for new borrowers.
However, Harris suggested rates could fall at some point.
Harris said: “If you look at swap rates, then three, five and 10-year money is all lower than two-year money, suggesting the market feels rates will peak and start to come back down.”
