Interest Rate Update to 11 November 2009

UK Interest Rate: 0.5%

UK Interest Rates Forecast: No change likely in 2009

Bank Will Vote to Keep Rates Unchanged

When the Bank of England’s Monetary Policy Committee announces its latest interest rate decision tomorrow (Thursday 5th November), it will almost certainly be one of no change.

How much that will help mortgage borrowers is unclear. Recent weeks have seen cuts in mortgage interest rates by a number of major high street mortgage lenders, but mortgage margins remain extremely high – much higher than those in most other Western European countries.

Mortgage Approvals Up – But Not Enough?

New figures published by the Bank of England have shown that the number of mortgage approvals rose to the highest level in 18 months in September, at 56,215. In contrast to this, mortgage approvals averaged 93,000 a month between 1993 and 2009 – demonstrating that house sale numbers are still much lower than usual.

Remortgaging remains very low too, thanks in part to it being cheaper for many borrowers to remain on their lenders’ variable rates than to remortgage onto new fixed or tracker rates mortgage deals.

Interest Rates – What Next?

While mortgage rates and savings rates look likely to stay low for the near-term future, there is no doubt that the financial services industry is confident that the Bank Rate – and hence all interest rates – will rise in the longer term.

Evidence of this can be found in the savings products offered by most high street banks and building societies. If you are willing to tie your money up for 3-5 years, you can access much higher interest rates. If these predictions come true – and eventually they will – then mortgage rates will be likely to rise too over the next few years.