Interest Rate Commentary

Before selecting a mortgage product it is worthwhile looking at likely interest rate trends: The Bank of England kept its bond purchase programme in place and left its benchmark interest rate at a record low as officials sustained emergency aid for the economy during the biggest budget squeeze since World War II.  Officials are now weighing the risk of inflation against the danger that government spending cuts will slow the economic recovery.  Rates may increase towards the end of the year but many economists now believe the MPC will sit on their hands until 2011.

In these unprecedented times it is difficult to be definitive when recommending which products offer the best value.  Arrangements linked to base rate offer excellent short term value but clients must remember that rates are likely to increase once the economic recovery gathers pace. Redemption penalties and tie-ins should be avoided if at all possible. With fixed rates at or close to the bottom of a cycle there is now an excellent opportunity to lock in to highly competitive products either short or long term.