Some experts are now predicting that the Bank of England will increase the base rate later rather than sooner. This comes after Thursday’s decision to hold the base rate at 0.5%.
Howard Archer from IHS Global Insight believes that there is a good case for holding interest rates at their existing level until the real effect of the fiscal squeeze has had time to impact. He expects the rate to stay as is until the second half of the year.
Andrew Goodwin, an economic adviser for Ernst & Young’s ITEM Club, went as far as to say he thought the MPC will want to avoid raising rates until the middle of 2012 when the economy will have normalised.
But where does this leave homeowners? Is it now time to move away from cheap standard variable rate products and instead opt for a fixed rate contractor mortgage?
Prior to Thursday’s announcement, some mortgage lending companies, anticipating a rise, increased the cost of their fixed rate mortgages. As soon as it was clear that interest rates would remain unaltered, they re-priced and in some instances, withdrew products.
Some mortgage experts still reckon people will be better off sticking with their cheap standard variable rate products. Ray Boulger from mortgage broker, John Charcoal, said that people paying 3.5% or over on their SVR mortgage will benefit if they change products, providing they have at least 15% equity in their current property. But he says that switching to a fix is not necessarily the answer.
But if you want a fixed rate mortgage, of the deals currently available, Boulger singles out a five-year fix at 4.19% on 75% LTV from Accord, as the cream of the crop.
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