As speculation arises over whether the Bank of England might even raise interest rates in response to the inflationary impact of events in the Middle East, it appears that the majority of households were already doubtful about the prospects for mortgage costs.
A survey by HomeOwners Alliance found that 23% of respondents expected rates to increase, while 25% thought they would decrease. Aspiring first-time buyers were more pessimistic, with almost half (47%) expecting rates to rise, while only 13% thought rates would fall.
Paula Higgins, chief executive of HomeOwners Alliance, said: “If the Bank holds rates steady it will give homeowners some breathing space, but the reality is that many households already feel deeply insecure about the direction mortgages are taking.
“Our research we conducted in February – before the latest escalation in global tensions – already showed that homeowners were almost evenly split on whether mortgage rates would rise or fall, underscoring how divided and uncertain people were even before events in the wider world caused more volatility.
“That uncertainty often leads to inertia, with homeowners waiting to see if interest rates improve.”
Higgins warned those needing to remortgage this year not to wait.
“If you leave it too late, you risk falling on your lender’s standard variable rate, which is often around or above 7% and rarely a good price,” she said. “The safest approach is to start the process early – with many lenders you can lock in a rate months in advance and still switch if better deals appear before completion.”
It now looks very likely that the Bank of England will maintain interest rates on Thursday (March 19) following the outbreak of the war in Iran, despite the fact that a month ago it was widely expected that interest rates would be cut.
Rachel Springall, financial expert at Moneyfactscompare.co.uk, said: “In an unprecedented turn of events, unrest in the Middle East has led to rising swap rates, pushing up mortgage rates and putting deals, some temporarily, off sale.
“These developments have undermined expectations that the Monetary Policy Committee would vote for a cut in the Bank of England’s base rate, with a rate cut now much more likely this week.
“If this uncertainty continues, and even if inflation rises, we could even see a rise in GDP before the year is out. It’s really too early to say what might happen, but borrowers looking for a new deal should seek advice if they are concerned about rising costs.”