Before selecting a mortgage product it is worthwhile looking at likely interest rate trends: At their September meeting the Bank of England voted unanimously to hold base rates at 0.1% and to continue with their existing programme of UK government and corporate bond purchases. The outlook for the economy remains unusually uncertain as it faces its sharpest recession on record. The economy is expected to grow and get back to its pre-Covid size at the end of 2021. Base rate is likely to remain at this emergency low level for the foreseeable future although negative interest rates still remain a possibility if growth falters.
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 as we appear to have reached the bottom of the current interest rate cycle. It is unlikely that lenders will pass on the recent cut in base rate as they struggle to maintain margin. Standout products are base rate trackers, preferably without redemption penalties, offering unparalleled current value and maximum future flexibility. As always, those with surplus capital should consider the tax advantages of an offset arrangement.