Before selecting a mortgage product it is worthwhile looking at likely interest rate trends: The Bank of England kept interest rates on hold at their October meeting highlighting greater financial market concerns about Brexit, after raising rates for only the second time in a decade, in August. The Bank sees inflation only a fraction above its 2% target over the next few years whilst predicting modest economic growth of 1.3% this year and an increase to 1.7% next year. Economists have ruled out a further rise before Britain has left the EU and Mark Carney has suggested we can expect one quarter point rise per year going forward, assuming the economy grows as expected. However, don’t rule out a rate cut if there is a ‘no deal’ Brexit.
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.