Although the Bank of England’s Monetary Policy Committee, (MPC) has yet again decided to keep Base Rate on hold, the internal splits within the committee seem to remain, with a four way split according to the minutes of the last meeting.
While the debate rages on, recent research conducted by the BBC reflected the differences within the MPC. Of 22 economists who were asked “In which month do you think the MPC will raise interest rates?”, 14 said August, 4 plumped for May and 1 each reckoned on June, July, November and February.
The follow up question, “What level do you think interest rates will be at by the end of the year?” prompted 12 to say 1%, 6 were at 1.25%, and 1 believed they would be up at 1.3%.
Many in the City have now tempered their interest rate expectations, reflecting the view that a summer rate rise is potentially the only one expected this year. Any further moves will depend hugely on future inflation and growth reports, with the August inflation report predicted to be a key driver.
The issues for the average householder have not changed and with many feeling the squeeze on the
ir real incomes, while an initial rate rise of say 0.25% as a shot across the bows may not cause a major issue, any subsequent rise will start to hurt a good many very quickly.
The good news, as far as mortgage borrowing is concerned is that there is a light at the end of a very long tunnel for those with property owning aspirations.
Mortgage lenders are beginning to relax slightly and there is now a smattering of products available at 90% Loan-To-Value, with at least one lender offering 95%. While the cost of these deals may seem expensive compared to the low Bank Base Rate, historically speaking these are pretty well priced.
Quite a few lenders have reduced their rates further and while tracker products continue to look attractive, there are still a good many borrowers who should be looking at competitive fixed rate options rather than trying to “beat” the market. The price of security should not be underestimated.
For those with a 40% deposit or equity, you can obtain a discounted variable rate as low as 1.99%, (2.90% APR), while tracker products with no Early Repayment Charge are available at just 2.35%, (2.40% APR).
Fixes start at 2.79%, (4.20% APR) for 2 years, 3.59% (4.80% APR) for 3 years and 4.39% (4.30% APR) for 5 years.
For further information please contact Andrew Montlake or Rob Gill at Coreco on +44 (0)20 7220 5100 or visit www.corecogroup.co.uk
Your home may be repossessed if you do not keep up repayments on your mortgage. A fee of up to 1% of the mortgage amount may be charged depending on individual circumstances. A typical fee is £495.
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