Rates must rise to free up funding, says IMLA

14 June 2010 | By Samuel Dale

The Intermediary Mortgage Lenders Association has warned that unless interest rates start to rise the mortgage market will remain undersupplied and the pressure on funding will grow.

As widely expected, the Bank of England’s Monetary Policy Committee held interest rates at 0.5% for the 16th month in a row last week.
Peter Williams, executive director of IMLA, says it is uncertain when interest rates will start to rise.

Williams says: “I think most professionals expect rates to rise next year, with the base rate edging up to 1% or 1.5%.

“But there is considerable uncertainty around this and some are expecting rates to stay low for longer. If we don’t see them rise the pressure on mortgage funding will become stronger.”

Williams adds that nobody is suggesting the base rate should rocket up but a balance must be achieved.

Increasing rates would put pressure on borrowers but Williams says the Bank must also protect the mortgage market.

He adds: “Industry expectations are that the base rate will go up marginally by the end of this year, to around 1%. But until we get through the emergency Budget and the government spending review the picture will remain unclear.

“I know the industry would like to see it moving up this year.”

Last October Roger Bootle, managing director of Capital Economics, said he expected interest rates to stay below 1% for the next five years.

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