But opinion is divided. The research from the Intermediary Mortgage Lenders Association (IMLA) shows 36% of mortgage brokers expect a rise in the Bank of England base rate before the year is out. Just 17% of lenders anticipating a rise this year.
The consensus among lenders is that the Bank of England will raise its base rate from 0.5% in the first half of 2015, for the first time since March 2009 with 72% taking this view including 44% who expect to see a rise in the first three months of 2015.
There is a greater split among brokers, with 44% predicting the rise will come in the first half of 2015 while 20% expect the 0.5% base rate will survive past the middle of next year.
IMLA’s research also reveals diverging opinions across the mortgage industry about which group of borrowers will be most affected when the interest rate rise finally occurs.
Some 56% of believe that it will be existing home owners who will be the most affected demographic, while 28% think it will be first time buyers. Just 11% believe recent first time buyers will feel the biggest impact.
By comparison brokers expect recent first time buyers and existing home owners will share the brunt of the interest rate rise, ahead of aspiring first time buyers. Both lenders and brokers agree that buy to let owners and landlords will be least affected by the eventual base rate rise.
‘The prospect of a rise in interest rates has been looming on the horizon for some time, but now it appears an increase is hovering closely overhead. The majority view across the mortgage industry is that a rise in 2015 still looks to be the most likely outcome. But it won’t be long before the consensus is challenged within the Monetary Policy Committee, and speculation over an early rise has clearly registered with a significant number of brokers,’ said Peter Williams, Executive Director for IMLA.
‘The fact that lenders feel recent first time buyers will be spared the impact of rising rates is an encouraging sign that stress tests implemented under the Mortgage Market Review are doing their job and will ensure that borrowers are financially prepared for higher interest payments,’ he explained.
‘Brokers will have a vital role to play in the months ahead as existing homeowners review their current deals and look to ensure they are on the most favourable rates for their personal circumstances,’ he pointed out.
‘It’s important to remember that the first rate rise in more than five, or potentially even six years will seem like a momentous occasion when it arrives, but the size of increase is likely to be very modest, certainly to begin with. The Bank is firmly focused on cautious steps that will preserve the recovery and will guard against punishing existing borrowers,’ he concluded.
