Before selecting a mortgage product it is worthwhile looking at likely interest rate trends: At their August meeting, the Bank of England’s Monetary Policy Committee voted unanimously to raise base rate by 0.25% to 0.75%. The Bank sees inflation only a fraction above its 2% target over the next few years whilst predicting modest economic growth of 1.4% this year and an increase to 1.8% next year. The market only expects one more rate hike by the end of 2019, but Mark Carney has hinted he would be prepared to cut rates if there is a ‘no-deal’ Brexit.
The Bank reiterated 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.