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RICS: expect base rate change in 2010

RICS: expect base rate change in 2010

Category: Mortgages

Updated: 05/01/2010
First Published: 05/01/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Improvements in the mortgage sector are likely to bring forward a rise in the Bank of England's base rate of interest, the Royal Institution of Chartered Surveyors (RICS) has said.

Figures from the Bank show that just over 60,518 mortgages were approved for house purchases during November, up from 57,718 in October, and the highest level seen since March 2008.

RICS' senior economist, Oliver Gilmartin, said that increasing momentum could drive up the base rate, which has remained stagnant at a record low 0.5 per cent since March last year.

"Mortgage approvals have now been rising consistently for a year and the latest credit conditions survey from the Bank of England continues to suggest a gradual improvement in the lending environment over the coming months," he said.

"The more buoyant housing market, allied to the pick up in economic activity now under way, is likely to bring forward the day when interest rates are back on the agenda.

"We expect the base rate to be raised during the second half of the year."

An increase would be a boost to savers with variable rate accounts linked to the base rate, but would mean increasing mortgage rates for homeowners with tracker deals, many of whom have effectively enjoyed an interest repayments holiday since the measure was slashed in early 2009.

Potential homebuyers will also be encouraged by Moneyfacts.co.uk figures that reflect an easing in required deposits to secure a property.

The proportion of home loans requiring a down payment of 25 per cent or more of a property's value fell from 62 per cent at the beginning of last month to 60 per cent at the start of January.

This is down on the two thirds of mortgages that required at least a 25 per cent deposit during the majority of 2009.

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