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Homeowners Tempted By Fixed Rates
Fixed rate mortgages may become more popular in the coming months as customers who are looking to buy a new property or arrange a re-mortgage in the near future take note of the recent Bank of England Monetary Policy Committee (MPC) meeting minutes for June, released this month.
The Bank of England Base Rate has been held at 0.5% for the past 16 months but one member of the committee has voted for an increase at the last two meetings. This may well have serious implications for anyone who does not have a fixed rate mortgage as their monthly payments are likely to rise in line with any increase to the Bank of England base rate.
Member of the committee, Andrew Sentance has called for a rise in the base rate from 0.5% to 0.75%. His opinion is based upon evidence to show that inflation will offset the downturn that is expected in economic growth during the coming months following the emergency budget from the new coalition Government.
The committee aims to make decisions that will bring inflation down to 2% and expect that this will happen in the medium term once current temporary global and domestic conditions have settled down.
Whilst, so far at least, Mr Sentance has been outvoted by the rest of the committee it is clear to see that changes will probably be on the way and it is anyone’s guess when this might happen. Mortgage lenders are watching the situation closely and it may become more difficult to arrange a low interest fixed rate mortgage as the year closes.
Both new and existing mortgage customers will draw their own conclusions about these developments but many will now consider a fixed rate deal to be the best option for the next few years.
Interest rates have been at an all time low for almost eighteen months and many commentators have expressed their concern that this cannot continue for very much longer. Home owners who are coming to the end of any special deals and offer periods will be considering whether to change their lender or product to a more stable mortgage loan.
First time buyers will be wondering if they wait any longer to buy a property they will be priced out of the market and find monthly repayments unaffordable. By choosing a fixed rate mortgage customers will be assured that their monthly payments will remain the same for the agreed period and be able to plan their budget accordingly.
Of course some analysts believe that the Bank of England Monetary Policy Committee will stick to its current policy of maintaining a low interest rate for the rest of 2010 and possibly beyond, but if you are considering buying a new home or swapping to a variable or fixed rate mortgage then you will make your own mind up about the short and medium term outlook for the UK economy and choose your loan accordingly.
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