22/02/2021
Before selecting a mortgage product it is worthwhile looking at likely interest rate trends. At their February meeting the Bank of England held rates at 0.10% and left its stimulus programme unchanged. The UK’s rapid Covid-19 vaccination programme will help the economy rebound strongly this year, according to the Bank of England. Growth is expected to shrink 4.2% during the first quarter, amid tighter lockdown restrictions. However, policymakers expect a rebound in the spring as people become more confident about spending. Base rate is not likely to rise for at least three years although negative rates remain a possibility if growth falters. It is worth remembering it took over ten years for base rate to rise following the credit crunch.
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 any further cuts 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.
