Talking to a broker early will be key
But Why?
Figures due tomorrow are expected to show that gross domestic product (GDP) grew by 0.1% in the first 3 months of this year, beating the banks forecasts but more importantly putting the economy on track to dodge a technical recession. This coupled with inflation figures remaining stubbornly high at 10.1% appear to have forced the MPC’s hand.
Analysts at Japanese bank Nomura noted “Stronger data supports the hiking cause. Most notable releases include the upside surprise to March core inflation, a strong pick-up in underlying wage momentum, generally ongoing strength in labour market activity, a rise in consumer confidence, and a more resilient looking housing market,”
Sky’s economics and data editor Ed Conway added: “Less than a month ago investors were betting the Bank of England interest rates would peak at 4.5 per cent or even 4.25%. “Now they’re betting they’ll hit 5.0 per cent this year. The highest projected rate since the mini-budget fallout. Another consequence of unexpectedly high and stubborn inflation.”
What does this mean?
Sat Singh, Director at Cleerly had this to say:
“In my opinion, today’s rate increase is likely to have little impact on the new rates being offered by lenders for those looking to buy a new home or re-mortgage. Most lenders have already factored in the expected increase into their new product ranges”
Sat went onto to say, “For me, the concerning comment is around the expectation that rates may now reach 5%, before settling and this could lead to an increase in borrowing costs for households. The team at Cleerly have been encouraging clients coming to the end of fixed rate mortgage, to engage in a conversation as early as 12 months before expiry. The team can start monitoring all the options for households to ensure they can secure the best rate possible as early as possible”.
Good news for those renters looking to buy their first home?
Despite today’s announcement, Skipton Building Society have announced they are launching a 100% mortgage. The product is being labelled as “revolutionary” way to help contractors off the never ending treadmill of high rents.
Whilst still yet to be officially launched, the new product will allow those who can demonstrate a 12-month track record of paying rent and all associated household bills qualify for a mortgage at a similar monthly costs. It is worth noting that this will be subject to a number of factors including but not limited to first time buyers, loan to income restrictions and a maximum loan of £600,000.