Before selecting a mortgage product it is worthwhile looking at likely interest rate trends: The Bank of England’s Monetary Policy Committee voted 7-2 to keep rates at 0.50% and cut its growth forecast for this year. The Bank now expects growth of 1.40% in 2018, down from its previous forecast of 1.80% made only in February. However, the Bank says the cut is almost entirely due to the disruption to the economy caused by the bad weather that hit the country in March. It expects a rebound in the coming months and notes unemployment remains low. Financial markets are now indicating there will be a rate rise towards the end of the year.
The Bank repeated previous guidance that future increases in rates would be at “a gradual pace and to a limited extent”. It is difficult to be definitive when recommending which of today’s products offer best value. Short and long term arrangements are both priced competitively but most experts now feel we are past the bottom of the cycle. It is likely that as rates rise the margin between payable mortgage rate and base rate will narrow. Those with surplus capital should always consider the tax advantages of an offset arrangement.