Advisers tell borrowers to secure deals early, citing faster repricing and energy-led inflation risks
Mortgage brokers expect the Bank of England (BoE) to keep the base rate on hold at its next Monetary Policy Committee meeting on Thursday, 30 April, but they are warning that a renewed inflation shock — driven by energy costs and wider geopolitical risk — could still push borrowing costs higher at short notice.
“I personally think they will hold rates, but there is a slight chance of an increase,” said Neil Mulhearn (pictured top left), advisor development manager at Echo Finance. “Inflation is way above target, driven primarily through oil price increases, and this will start to filter down to other commodities as suppliers factor in increased distribution costs.”
Bob Singh (pictured top right), director of Chess Mortgages, also expects a pause, arguing that policymakers will be wary of tightening into a fragile economy. “Given banks are cutting rates, my feeling is it will be a hold,” he said. “BoE doesn’t want to exert more pressure on the economy given our difficult times.”
According to Bank of England governor Andrew Bailey, policymakers will not be rushed after what he called a “very big energy shock”, with higher oil and gas costs threatening to push prices up while weighing on growth. The latest CPI data, showed inflation rising to 3.3% in March, with renewed Middle East tensions feeding into fuel costs.
Even with a hold widely expected, brokers say the bigger issue is how quickly lenders can move. Moneyfacts has reported mortgage products are being repriced and withdrawn at record speed, with an average eight-day shelf-life, while availability has fallen and average fixed rates rose through March as rate expectations “flipped” amid geopolitical volatility.
That has pushed brokers towards a simple message: act first, then reassess. “Get deals booked as quickly as possible,” Mulhearn said. “We have seen very rapid increases to rates over the last 6 or 7 weeks, any escalation to the middle East crisis could push them higher.
“Get the application in now, book the rate, and if rates do fall in the coming weeks, we can always switch you to a better rate prior to completion.”
Singh framed the same approach as a hedge. “My advice is to act now and change later should rates fall,” he said. “So cover your current position and keep your choice under review.”
On product strategy, both pointed to trackers where borrowers can exit without penalty, though they warned that flexibility comes with risk if inflation proves persistent.
“Trackers would be the obvious choice, especially if there are no ERCs, but these are in short supply and come with the risk rates could rise in the coming months,” Mulhearn said.
“The BoE rate of 3.75% is low by historical standards, and borrowers need to accept that unfortunately there is no guarantee we will see the low rates we experienced throughout the 2010s.”
Singh said penalty-free trackers can suit clients who want optionality. “Trackers may be an option for some, particularly penalty-free ones giving you the option to opt for a fixed rate from the same lender or another should rates start to creep up,” he said.
Over the next six to 12 months, brokers remain split between a slow glide lower and renewed tightening, depending on whether energy costs keep pushing inflation higher. “It all depends on the Middle East and how things go,” Mulhearn said.
“If peace is achieved, I think we will be at a very similar rate in 12 months as to where we are today. If the war drags on, I fully expect rates to rise in an effort to combat inflation. If inflation figures keep rising, then one increase cannot be ruled out.”
A Mortgage Introducer poll has suggested brokers are now more likely to anticipate further increases this year, with the largest group expecting two rises, about a third expecting one rise, and around one in five expecting no change.
Mulhearn warned against trying to second-guess the market. “Consumers shouldn't try to outhink the market,” he said. “Trying to guess what will happen, being certain that rates must fall (as was largely anticipated in February) can lead to huge financial mistakes.”
Singh said uncertainty may also change buyer behaviour, particularly at the top end. “Uncertain times like these present opportunities to find good deals from motivated sellers so a 5%/10% offer below asking price may not be silly at all,” he said. “The £1 million-plus market is where significant discounts can be seen.”
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