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.