Nigel Tennant from Mortgage Advice Bureau in partnership with Barbers comments on the latest Bank of England base rate decision.
The short-term outlook for the UK has deteriorated since the Bank of England issued its quarterly report in February and inflation is now forecast to increase to more than 5%. In a normally functioning economy policy setters would be raising interest rates to counter this.
Although we have once again returned to economic growth the feeling is that the economy remains far too fragile to cope with any rise in interest rates in the short term. We continue to hear significantly different comments from forecasters giving their opinion on what will happen with the economy and the policies that should be adopted to both shape and influence it.
On the one hand, some believe the Bank of England base rate should be raised now and steadily throughout the remainder of 2011 and into 2012, forecasting a base rate of 2.75% by the end of next year. Others take the opposite view and believe that the rate must and will remain where it is possibly remaining at the current 0.5% both this year and all of next.
Who knows who is correct but in terms of what is happening to mortgage rates May has seen a flurry of activity with lenders withdrawing and re-introducing new products, refreshing and re-pricing existing mortgage deals with hardly a single working day going by without some product change taking place.
Average mortgage rates for 2 and 5 year fixed rates fell back by 0.06% and 0.18% respectively in June from May and now stand at 4.44% and 5.44% respectively. Average two year tracker rates also reduced further to another new low of 3.38% in June down by 0.02% from May.
Mortgage product numbers overall have continued to improve, with the number of deals throughout May averaging a little over 7,000. However, we have seen a further increase from lenders, recently with product numbers averaging more than 7,400 in the first two weeks of June. This demonstrates an increasing willingness to lend and more products means greater competition and better rates for borrowers.
Nigel is from Mortgage Advice Bureau in partnership with Barbers. For further information on how the latest base rate decision affects you, please call 01952 221200 or email n.tennant@barbers-online.co.uk or click here to visit to Mortgage Advice section of our website.
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