Interest Rate Update to 10 August 2011

UK Interest Rate: 0.5%

UK Interest Rates Forecast: Rate rise increasingly unlikely

BoE MPC Holds Rates At 0.5% in August

The Bank of England's Monetary Policy Committee kept rates on hold at 0.5% in August, a decision that was a foregone conclusion and now looks likely to be one of many more 'no change' decisions to come over the next 12 months.

This is especially likely in the wake of the United States Federal Reserve decision to leave its short-term interest rates frozen until at least 2013, in a move aimed at helping to bring a halt to this week's worldwide stock market falls.

The outcome of all of this for homeowners is that low interest rates are likely to continue for the remainder of 2011 and quite possibly most of 2012.

Mortgage Lenders Cut Interest Rates Again

Mortgage rates just keep on getting lower. Spurred on by the increasing unlikelihood of the Bank of England raising the Bank Rate, mortgage lenders are cutting rates still further on tracker and fixed rate deals.

Five-year fixed rates are now available at less than 3.5% for borrowers with a deposit of at least 25%.

Number of First-Time Buyers Up In June

The number of mortgages approved for first-time buyers rose by 24% in June to 18,100, according to new figures from the Council of Mortgage Lenders. The value of the loans also rose and was 29% higher than in May.

First-time buyers generally struggle more than other buyers to get together a large enough deposit, but the average loan-to-value ratio of first-time buyer mortgages in June was 80%, showing that a 20% deposit is attainable for some first-time buyers.

In comparison, home movers in June had an average loan-to-value ratio of 70% and spent 9.8% of their income on interest payments – significantly less than the 13.4% of income spent by first-time buyers on their interest payments.