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Borrowers can now benefit from the lowest mortgage rates in years, according to calculations from two well-known financial sites.
Research from Moneysupermarket.com suggests that increased competition between lenders has driven down the costs of both fixed-rate and tracker mortgages. This has left rates at their lowest level since the Bank of England cut its base rate to 0.5% in 2009.
Divisions at the heart of the UK’s interest rate policy are becoming starker – posing a dilemma for mortgage borrowers.
The split has occurred between members of the Monetary Policy Committee (MPC), which sets the Bank of England’s influential base rate, known as “Bank rate”. On one side are those who say that a rise in rates is needed to tackle high inflation, currently running at 4.5%. They argue that the Bank’s “wait and see” approach risks undermining its credibility – with the result that the public will begin to anticipate higher prices. Higher wage demands could push up prices further, leading to an inflationary spiral.
A recent opinion poll suggests that more than a quarter (28%) of us believe interest rates have risen in the last 12 months, while a smaller proportion – 17% – think they have fallen.
The poll was conducted for the Bank of England, whose Monetary Policy Committee (MPC) has actually kept Bank rate (often called “base rate”) on hold at a record low of 0.5% since March 2009.
Standard variable rate mortgages are coming under fire, after consumer watchdog Which? warned of a squeeze on borrowers from higher interest rates.
Standard variable rates (SVRs) are the headline rates which many borrowers shift onto when their original mortgage deal lapses. According to Which? thousands of those on their lender’s SVR could face financial difficulties when interest rates begin to rise.
Mortgage lending received a welcome boost in May, according to latest figures.
The Council of Mortgage Lenders (CML), reports that gross lending totalled some £11.3 billion, 12% up from the £10.1 billion lent in April, and just ahead of the level for the same period last year.
Bank of England governor Mervyn King has mounted a strong defence of its low interest rate policy.
In a speech to top City figures at the Mansion House, the newly knighted Sir Mervyn highlighted the role of the record-low Bank rate in keeping the economy afloat since the financial crisis. And he signalled that, with low wage-growth and restricted lending by the banks, inflation was likely to fall back – making damaging rises in rates unnecessary.
Mortgage lending for house purchase grew in April, according to an industry body.
Figures from the Council of Mortgage Lenders (CML) show that there were 40,900 loans worth £5.9 billion in the month, as against 37,500 worth £5.5 billion in March. But the total was still down on that seen 12 months previously.
The Bank of England has kept interest rates on hold at 0.5% for the twenty-seventh time in succession – to the undoubted relief of millions of homeowners.
This month’s decision by the Bank’s Monetary Policy Committee (MPC) had been widely trailed, after a series of indicators suggested the recovery might by stalling. This week the International Monetary Fund (IMF) became that latest body to downgrade the UK’s growth forecast – to 1.5% – with the squeeze from cuts and tax rises expected to impact already weak consumer demand.
It’s being suggested that as many as 300,000 hard-pressed homeowners may have converted their mortgages to interest-only in recent years.
FSA data shows that the total number of interest-only borrowers went up by almost 370,000 in the three years after the financial crisis hit in late 2007. According to an analysis by The Daily Telegraph, most are people who have switched – because of financial difficulties and the need to minimize repayments to avoid a default.
Lenders and house builders have been involved in secret talks aimed at easing the supply of mortgage finance, it’s reported.
According to The Times, leading house builders such as Taylor Wimpey and Barratt have been in discussion with the Council of Mortgage Lenders and major banks, including Lloyds and Santander.
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