The Bank of England's Monetary Policy Committee held base rate at 0.5% yesterday as expected, but expectations of an early rate rise are growing.
Bank governor Mark Carney's forward guidance, published in September, suggested that rates wouldn't rise until mid-2016 at the earliest, but that is under increasing pressure.
The Bank's quarterly Inflation Report, due next week, is expected to revise economic growth upwards and unemployment forecasts down.
Alan Clarke, economist at Scotiabank, said if the Bank dropped its unemployment forecast by just 0.1% next week, that would bring the key 7% threshold, at which it may consider hiking rates, forward by more than a year.
"'As such, it should validate market expectations that the first rate hike is delivered in 2015."
Jeremy Duncombe, director, Legal & General Mortgage Club, said borrowers need to start planning for a rate rise, with latest research from the National Institute of Economic and Social Research NIESR predicting the Bank’s forward guidance criteria could even be met as early as Q1 2014. "Conversations around interest rates and quantitative easing will therefore start to heat up as we approach the end of the year.
"Although no one knows exactly when, a rise in the base rate is on the cards. For those considering whether to remortgage or move to a fix, now is the time to think seriously about taking advantage of today's historic low rates.
"Affordability is a key issue at the minute and borrowers need to consider how they’d be able to cope with a rise in monthly repayments.”
The buoyant property market could also up the pressure on the Bank, and Ray Boulger at broker John Charcol said the housing market revival is set to continue. “Residential lending has recovered strongly this year and the final CML gross lending figure for 2013 is likely to show an increase of at least 20%, to a little north of £170 billion.
"All the factors producing a sharp increase in lending this year will still be in place next year. Therefore I expect gross lending next year to increase further to £195 billion to £200 billion.
“The Nationwide and Halifax house price indices, based on the actual figures, are showing increases of 7% and 6.6% respectively for the first 10 months of this year.
"Indications are that these indices will end the year with an increase of about 9%, with a similar rise looking likely for next year.
"What was until recently mainly London centric is now rippling out well beyond the capital and as people become more confident that house price rises have further to go the increase will feed on itself."
Activity will be increasingly driven by a growing number of 95% LTV mortgages, most of them offered outside Help to Buy, as lenders get a better deal by using private insurance instead, Boulger said.
Next week's quarterly inflation report may tell us more.
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