Last week’s increase in the base rate to 5.25 per cent is expected to spark more interest among borrowers to switch from variable deals to fixed rates.
The Bank of England monetary policy committee’s decision to impose a 25 basis point rise so early in the year took most of the industry by surprise as an increase was not expected until February.
The Council of Mortgage Lenders is predicting that rates could reach 5.5 per cent by the end of the year because of inflationary pressures and higher wage growth. It was the third increase in the base rate since last August.
Council of Mortgage Lenders director-general Michael Coogan says: “The timing of this rise is sooner than we expected although we have been forecasting higher rates.
“Mortgage borrowers who are concerned about the impact on affordability can still consider a wide range of attractive fixed-rate deals. Anyone borrowing on a variable-rate basis should factor in an expectation that rates have further to rise.”
GMAC-RFC director of marketing Jeff Knight says: “The industry has expected another rate rise for some time but I did not expect it to happen as early as January, so this has come as a slight surprise. I believe the market will see another rate rise later in the year to 5.5 per cent. It is difficult to see a rate rise higher than this in the next six months but I would not rule it out before a later reduction.”