Where Next for Interest Rates


The Bank of England Base Rate has been at 0.5% since March 2009 and despite threats of rate rises for the last couple of years it is expected to remain at that level in to next year.  The most common question I get asked by my clients is 'when do you think rates will rise, and by how much?'.

Of course the answer is nobody knows, not even the Governor of the Bank of England Mark Carney.  Everybody has their own opinion but it will ultimately come down to the economy and how it performs going forward.  A few months ago it looked certain that a rise by the end of the year inevitable, but in recent months this has changed and now the markets are expecting a rise in the spring or summer of next year.

In the October minutes from the Monetary Policy Committee meeting seven members voted for the rate to remain the same while two considered an immediate rise was appropriate.  There are still issues in Europe with growth stalling and very low inflation, while the UK Consumer Price Index fell back unexpectedly to 1.2%.

Over the last few weeks the fixed rates have dropped as the lenders take advantage of lower swap rates and an increase in competition for business.  Mortgage approvals are down year on year by 12.3% according to recent figures from the Bank of England and house price rises are slowing.  The Mortgage Market Review last April has made it more difficult for some to obtain finance and this has contributed to these reductions.

In the Sussex area where most of our clients are based there has been less activity in purchase mortgages over the last three or four months and prices seem to have stabilised.  Re-mortgage activity has picked up with the very low fixed rates on offer and people worried about future rate rises are taking advantage while they can.

Whether you are looking to buy a property, or have a mortgage already, it is important to prepare for higher rates in the future.  Make sure you can afford an increase in monthly payments and the mortgage calculator on our website can be used to give you an idea of the monthly payments based on different interest rates.



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