Brokers keep their cool despite base rate worry

Brokers have rebuffed claims that confidence in the mortgage market is falling on the back of growing expectations of a rise in the Bank of England base rate.

The BoE’s Monetary Policy Committee last week held the base rate at 4.5% for the 10th month in a row, although many experts confidently predict a quarter point rise is on the cards.

Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors, says: “We expect the BoE to follow the lead of other central banks and raise interest rates later this summer or in the autumn.

“A modest rise in borrowing costs is unlikely to derail the economy but households on tight budgets will need to factor higher interest rates into their calculations.”

Research from NMG Financial Services Consulting shows that advisers’ confidence in the prospects for their businesses over the next year has fallen from 53% to 38%.

Confidence in the prospects for the mortgage market as a whole has fallen from 48% to 33%.

Some 51% of respondents think there will be a fall in base rates within three months with just 12% forecasting an increase.

Views on the base rate have changed, with 52% now expecting the next move to be up and just 5% expecting a cut in the next three months.

David Burns, director of NMG Financial Services Consulting, says: “These results show that confidence is fragile.”

But Harpal Singh, operations director at Optoma Broker Solutions, says: “It’s too early to gauge what the reaction would be to a rise in the base rate. We are in danger of creating a lack of confidence by talking about it and should keep these results in context.

“A marginal increase in the base rate should not have a dramatic affect on the market.”

Wayne Unsworth, mortgage adviser at Hallmark IFA, says: “I have noticed uncertainty among clients about which products to go for as a result of the widespread expectation of a base rate increase.

“But our business is up and our confidence has not been knocked. We would not welcome an increase in the base rate as lower interest rates are better for our clients.”