Rob Starr, CEO of Seico Insurance and Mortgages, provides a personal insight on yesterday’s announcement regarding interest rates:
“The Bank of England has unexpectedly held interest rates at their current level much to the surprise of most people. But if you look at the reasons for the current rise in inflation then it’s quite clear that the cause has not been the property market, it is much more related to the movement of goods and the general price increases. Therefore holding interest rates as they are does make sense. The key questions though are, how long will they hold them for, and will mortgage lenders still increase their rates even though their own cost of borrowing has been held?
The first point, how long will they hold them for, is impossible to answer, so all we can do is guess. My best guess is that they will have to raise them at some point. Rates are just so very low at the moment and even though inflation is not being caused by the property market it is fair to say that a rise in rates is still one of the best ways to control inflation. So I really do think it’s inevitable. However, there is no need to panic. Even if rates do increase they would have to treble before they reached worrying levels and in all reality that will not happen. So my suggestion is that you have time to act in a calm and controlled way. But act you should! Now is the time to talk to your broker and just prepare. Getting something in place now whilst rates are so low, that will last you two or five years, is clearly sensible so you can weather any storm that is perhaps around the corner.
The other point I made was to do with lenders themselves. The cost of borrowing to lenders from the market has been held, and that is great. But it does not mean that they have to pass that on to the consumer. My instinct, after thirty years in this industry, is that lenders will want to protect themselves today rather than wait for tomorrow. I strongly believe that the majority of lenders will now start to increase their fixed term rates. It may only be a point of a percent to start with, but I believe that they will do this immediately and that we will start to see higher fixed rates even if the base rate stays the same. It’s only sensible for them to prepare for an increase now and as such I think we as consumers should do the same. So whilst I would advocate you taking a calm and measured position, I would also recommend you speak to your broker and just see if there is a decent two or five year fixed rate still available that you could either switch to immediately or even just secure and hold onto until your current deal expires.
So it’s good news all in all, but does not really change my view that having a look today and planning for the next few years would be the sensible thing to do.”
For more information on Seico Insurance and Mortgages, please visit www.seicogroup.co.uk.