Low Interest Rate for the Next Two Years? Peter Gordon comments..

Market participants expect the Bank Rate to remain unchanged for around two years says the Bank of England’s Monetary Policy Committee. The minutes of the last meeting held by the MPC earlier this month revealed that market participants expected the committee to vote to increase the amount of Quantitative Easing at the meeting. The MPC said that strains in bank funding during the second half of 2011 had begun to feed through into further increases in the cost of credit for some borrowers.

However, the Committee also said that this had improved since the turn of the year and, in time, it would allow spreads of interest rates paid by UK households and businesses to decline somewhat. Seven members voted for an increase in QE by £50bn to £325bn whilst David Miles and Adam Posen voted in favour of an increase by £75bn to £350bn. The members say that the introduction of an additional round of QE was driven by the most recent projections in February’s inflation report that would undershoot the 2% target in the medium term without further monetary stimulus.

With the general consensus agreeing that Bank Rate will remain low for the next two years, we are recommending Bank Rate tracker mortgages for the adventurous borrower. For the more cautious borrower longer term fixed rates may be more suitable.

Other reports in today show that the first time buyers have increased again last month before the Stamp Duty holiday ceases at the beginning of April.

On a final note, we are receiving calls from some of the banks this week who are reducing their product fees to sensible levels in order to attract business. These fees should be taken into consideration when calculating the cost of borrowing together with the interest rate charged. If prospective buyers are being put off by large loan fees they can speak with me to see what competitors are prepared to offer.
Peter Gordon, A.J.Buckley. 01483 426300. www.ajbuckley.com