Before selecting a mortgage product it is worthwhile looking at likely interest rate trends: At their May meeting the Bank of England has raised interest rates for the fourth consecutive time to try to curb the rapid rise in the cost of living. The increase to 1.00% came as the Bank said inflation is likely to reach 10% by the end of the year. The MPC voted by a majority of 6-3 for the measure, although three members voted for a bigger increase. The Bank said ‘some degree of further tightening may be appropriate in the coming months’ but we must now be wary of a rapidly slowing economy.
It is difficult to be definitive when recommending which of today’s products offer best value. Both short and long term fixed arrangements are priced competitively although we have passed the bottom of the current interest rate cycle. Product pricing is rising rapidly and at short notice as the wholesale money markets have risen steeply over the past few months. Standout products are base rate trackers, preferably without redemption penalties, offering excellent current value and maximum future flexibility. As always, those with surplus capital should consider the tax advantages of an offset arrangement.