As the monetary policy committee argued their very different views on interest rate changes, many in the mortgage industry pondered secretly, some publicly, that quite frankly an early rate rise will be good for business.
After all, nothing is better than panicking people into action than a short, sharp shock. But it might not be quite that simple and could provide as many problems as it solves. For many people, a sudden half-point rise could prove to be the tipping point, especially if followed by another one or two increases.
A rate rise in May will prompt a small flurry of activity in the remortgage world but may not translate into the massive increase in business that many believe it will. Some lenders are concerned the demand to move on to a fixed rate will cause them supply issues. If they are deluged with remortgage business suddenly, something has to give.
We could see higher than expected rate rises from lenders, which may put many off looking to fix in, or a further tightening of criteria. Even now, it is the supply of mortgages constraining the sector, not quite the demand issue that the Council of Mortgage Lenders often alludes to.
A rate rise will bring will hit mortgage prisoners hardest – those on high LTVs or whose job situation has changed and are unable to remortgage to a fixed rate. The rates on offer for these clients are so high that the phrase payment shock becomes payment panic.
Lenders can help by offering existing clients in such a position a more realistic fixed rate, something starting with a 4 rather than a 6 or even 7. I am sure there must be some room to manoeuvre.
If you are thinking a rate rise will be the answer to all your issues, then you are missing the point. There are many other things you could be doing rather than waiting for things that cannot be controlled. As an industry sage recently told me, too many people sit there and say, once this happens or that is out of the way, things will get better. But there is always another something that needs to happen before things improve, until you realise, as Alfred D Souza says “these obstacles were my life.” Making the best of things now is what really matters and there are still many opportunities.
Andrew Montlake is director of Coreco