Interest Rate Update to 13 July 2011

UK Interest Rate: 0.5%

UK Interest Rates Forecast: Rate rise decision looks increasingly unlikely

BoE Bank Rate Remains On Hold At 0.5%

The Bank of England's Monetary Policy Committee voted once again to leave the Bank Rate unchanged at 0.5% this month, meaning another month of low payments for homeowners with variable or tracker rate mortgages.

It has now become obvious that Government and Bank of England policy is to use high levels of inflation to reduce the value of the UK's debt (and of individual's cash savings). This being so, we could continue to see low interest rates for a considerable while longer. It is becoming increasingly hard to predict when the MPC will decide to increase the Bank Rate – some economists are now expecting the current 0.5% rate to remain in place until well into 2012.

Remortgaging Up In May But No Change For First-Time Buyers

The number of new remortgaging loans rose by 17% in May and the value of those loans rose by 20%, according to new figures from the Council of Mortgage Lenders (CML), a trade body that represents most mortgage lenders.

The number of new house purchase loans also increased, but only by 1.7%, highlighting the current low volumes of housing transactions.

Meanwhile the CML reported that the average loan-to-value ratio for first-time buyer mortgages in May was 80%, unchanged from April and up by just 1% from May 2010, when it was 79%.

This highlights the fact that most first-time buyers still have to produce deposits of 20% or more. Despite the ongoing growth of the 90% LTV sector of the market, such deals are still only available to the safest of borrowers.