The UK base rate may have remained unchanged for two years, but property owners must review borrowing arrangements now as rates will inevitably rise soon, says Knight Frank Finance.

Last week’s decision by the Bank of England’s Monetary Policy Committee (MPC) to keep the base rate on hold at 0.5% for a full two years should not lull borrowers into a false sense of security as rates will rise soon, says Simon Gammon, head of Knight Frank Finance.

He said: “In February three members of the committee voted to raise rates, and I would not be surprised if that number had increased further when we get the minutes of this month’s meeting. The MPC has nine members so it would only take a small swing in sentiment for those voting for a rise to be in the majority.

“Although there is a feeling that lenders have already factored an increase in the base rate into their own rates, I would not take that for granted. As soon as rates do rise there will be a rush to lock into longer-term fixed rates before any further increases. This will inevitably lead to the best deals disappearing quickly and, from a purely commercial view, will allow lenders to increase their margins.
“The average five-year fix has already edged up to about 5.5%, almost 200 basis points higher than the markets low point of around 3.7%.”