Borrower activity ahead of potential rate hike this week

The pressure cooker is about to pop. Clearly, lower income borrowers are panicking and are very concerned, so much so that many are paying Early Repayment Charges to fix a deal before their current one is up for renewal. We need leadership from the Tories and some sensible policies, but both are sorely lacking.

Despite the raft of withdrawals on Monday, our clients have not been coming to us worried about the prospect of an emergency rate rise. In part, this is because the Bank of England base rate has been stable for so long that we have a whole generation that does not realise an emergency meeting can be called, and rates increased sharply with little notice. Most are expecting the next increase at the scheduled November meeting, but it may come sooner than that, potentially this week. If an emergency rise does occur this week, it will be an enormous shock for many borrowers and could hit property market sentiment hard.

As of Monday morning, there were no updates in my inbox from lenders about their rates changing. However, this further highlights the urgency from all brokers where a client’s deal is ending in the next six months, to speak to their clients as soon as possible to have their mortgage and circumstances reviewed. Therefore, a new rate can be secured prior to any further increases of the Bank of England and in turn the lenders increasing their rates.

Lenders have hit the panic button and a number have withdrawn all products from the market in anticipation of a potential emergency MPC meeting. The news will be bad but how bad is yet to be seen. There are rumours the base rate will rise as high as 6% by May next year.

We had a mixed bag on Monday following the slump in Sterling and increased likelihood of a rate rise. Some of our self-employed clients are now holding off buying, either because they think property prices will fall, or just because they're lacking confidence amid the broader economic outlook. But other clients are desperate to lock in a lower remortgage rate now before interest rates soar to the moon. And this time they may not come back.

Many homeowners are already finding themselves just being able to tread water with the recent rate rises. However, any further rises could see hundreds of thousands of people being dragged into the deep. We're yet to see lenders make a move and increase their rates even further but if the Pound continues to slump the chances of intervention are looking more and more likely. Mortgage holders with a mortgage due for renewal in the next six months can't afford to bury their heads in the sand and, if they haven't already, need to get their foot on the pedal to get that next mortgage secured.

I've had a few enquiries already today to get things done before another base rate rise. I'm sure this wasn't the plan when they came up with the mini-budget. Ultimately, the plan is to increase home movers and first-time buyers by raising the Stamp Duty limits, but unfortunately if that leads to interest rate rises people may not be able to afford the mortgages to go with them. I haven't seen any panic movements by lenders yet for equity release or mortgages, but it is a case of when, not if.