Before selecting a mortgage product it is worthwhile looking at likely interest rate trends: Despite recent ‘spin’ from two members of the MPC, the nine rate setters voted unanimously to keep rates on hold at 0.75% at their June meeting. Economic growth has now been revised downwards and the BoE said in its policy statement “Globally, trade tensions have intensified. Domestically, the perceived likelihood of a no-deal Brexit has risen”. The next movement in base rate could be “in either direction” depending on the Brexit outcome. Inflation has fallen back to its target of 2% further easing pressure on the Bank to raise rates.
If rates do start to rise the Bank has reiterated its earlier comments that it would be at “a gradual pace and to a limited extent”. Assuming an orderly Brexit only one quarter point increase is expected by 2021. 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 as we hover close to the bottom of the cycle. It is likely that if rates begin to 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.