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Interest Rate Commentary

Before selecting a mortgage product it is worthwhile looking at likely interest rate trends: At their February meeting the Bank of England has raised interest rates for the second time in three months to try to curb the rapid rise in the cost of living.  The increase to 0.50% from 0.25% came as the Bank said inflation was on course to hit a 30-year high.  As expected, the MPC voted unanimously to end its bond purchase programme but surprisingly four of the nine members had voted to increase rates to 0.75%.  The market is pricing in at least one more increase, possibly more during the year but the Bank must be careful not to choke off the economic recovery, already stagnating due to the Omicron Covid variant.

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 product pricing will move significantly until the global pandemic is behind us. Standout products are base rate trackers, preferably without redemption penalties, offering excellent current value and maximum future flexibility. As always, those with surplus capital should consider the tax advantages of an offset arrangement.

© Copyright Professional Mortgage Services. The information contained herein may be based on data obtained from recognised statistical sources, issuer reports or communications, or other sources believed to be reliable. However, such information has not been verified and we do not make any representations as to its accuracy or completeness. Any statements non-factual in nature constitute only current opinions which are subject to change, without notice. The guidance and/or advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK.