November 5th, 2014
The Bank of England Base Rate has today been held again at 0.5%, as the countdown continues towards a likely increase in early 2015.
The Bank’s Monetary Policy Committee (MPC) has voted to hold the rate again for the 68th consecutive month, since the Base Rate hit its current historic low in March 2009.
That spring, the MPC voted to reduce the Base Rate to a level never seen before, in order to reduce the strain of borrowing for the majority of households in the UK following the previous year’s recession.
“It’s encouraging that the Base Rate has again been held at its current level, as this would suggest that the Bank of England are adhering to their pledge that they would increase rates gradually, rather than a sudden jump to pre-recession levels” said Taj Kang, Business Development Director at Contractor Mortgages Made Easy.
“It will however be intriguing to see the minutes of the latest MPC meeting, released in the next few weeks, to see how close a call it was to keep rates low, as this may give an indication of when next year we could expect to see rates rise.”
Last month saw a 7-2 split in the MPC vote on whether to increase rates, with two members, Ian McCafferty and Martin Weale, voting to increase rates by 0.25%.
“Two members of the Monetary Policy Committee have voted in favour of an increase to 0.75% for several months, perhaps giving a nod to where the Base Rate will be when it does eventually increase” added Kang.
Ironically, whilst the rate has again been held in order to reduce the cost of borrowing, several mortgage lenders are slashing interest rates in a bid to meet aggressive lending targets before year-end.
With the knock on effect of the Mortgage Market Review (MMR) in April still being felt now, many lenders are behind where they would like to be for lending targets throughout 2014, leaving several with sizeable reserves left unused. This in turn has led to the introduction of some of the lowest fixed rates ever seen, available to Contractors.
“Many of the big players in the mortgage market are currently sitting on vast amounts of money that has been allocated for lending, which has not been taken up due to the underwriting difficulties suffered as a result of MMR” added Taj.
“Now that service levels have on the whole returned to normal, banks are focussing on where they can meet targets by reducing rates to levels never seen before. This week saw the withdrawal of an exclusive rate available to First Time Buyer Contractors with a 10% deposit through the Halifax, fixed at 2.99%, for example; and they are not the only ones to offer such unbelievable deals.”
There is however a word of warning, as many suffer unexpected delays when looking to take the plunge; and approach that could prove very costly, as Taj explains.
“The big downside of the current ‘flash sales’, is that these rates are invariably ‘here today, gone tomorrow’, quite literally in some cases. It is financially prudent to be ready to move when these rates become available, and the best way to do that is by speaking with the right broker sooner rather than later.”
Article By: Mark McBurney, Senior Mortgage Consultant at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
Tel: 01489 555 080