What a base rate rise would mean for mortgages: Bamford

Pad Bamford

Some MPC members think it’s time to lift BBR back to 0.5 per cent, and we all know which borrowers would be hardest hit

They say even the longest journey starts with a single step and, given the news from the Monetary Policy Committee this month, one can’t help but feel we are embarking on a Bank base rate journey back to some kind of ‘normality’.

Ever since the MPC chose to cut BBR by 25 basis points after the EU referendum a year ago, we have been waiting for what seemed an inevitable move back up. However, the decision by three members this month to vote for an increase in BBR was not enough to make that rise happen. Surely we are getting closer, though?

Many suggested last year that the MPC had acted too hastily with a further cut but, in hindsight, it did steady the economic ship and instil confidence. Now that inflation is running at 2.9 per cent, however, there are clearly those who think the time is right to move back to 0.5 per cent, with an eye on further rises over the medium term.

So, what could it mean for the mortgage market?

One has to think that the surge in remortgaging we have seen recently will gain further momentum. Any signal that rates are on their way back up will be taken by borrowers as a catalyst to fix payments, even if such a move is unlikely to have a discernible impact on product rates.

In the low loan-to-value, residential space, lenders are competing hard and I do not expect a noticeable rise in prices. However, while market competition may be intensive in the perceived lower-risk areas, for those deemed to be at the higher end of the spectrum this is not the case. Indeed, rates have already been rising for them for some time.

This is definitely a mortgage market for the ‘haves’ rather than the ‘have nots’ in terms of deposit/equity, in the short term at least. No minor increase to BBR is going to change that.

Pad Bamford is business development director at AmTrust International