Before selecting a mortgage product it is worthwhile looking at likely interest rate trends: The MPC’s nine rate-setters voted unanimously to keep interest rates on hold at 0.75% at their March meeting. The Bank of England said “the economic outlook will continue to depend significantly on the nature and timing of the EU withdrawal”. Having now agreed a six month extension to Brexit we are still no clearer as to the likely outcome. Financial markets put the chance of a rate rise this year at less than 50%, however, don’t rule out a rate cut if there is a ‘hard’ Brexit.
When rates do start to rise the Bank have previously indicated that it 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.