Interest Rate Update to 16 December 2009

UK Interest Rate: 0.5%

UK Interest Rates Forecast: Staying low but might rise in the second-half of 2010

Bank of England Keeps Rates on Hold Again

It came as little surprise when the Bank of England announced on the 10th December that the MPC had voted to leave the Bank Rate unchanged at 0.5%. The Bank’s £200 billion quantitative easing programme is expected to take another two months to complete – that is likely to be the earliest time at which the MPC might consider increasing the Bank Rate.

Mortgage Rate Forecasts for 2010

Most industry experts are expecting to see more of the same in 2010. Broker David Hollingworth of London & County told the Telegraph that “I expect that we will continue to see the tiering of rates dependent on the level of deposit that the borrower can muster and lending criteria are likely to remain tight, particularly with smaller deposits.”

In other words, the best deals will continue to be available only to those with larger deposits.

Melanie Bien of Savils echoed this sentiment, saying that “the mortgage market in 2010 is likely to be similar in size and shape to 2009’s.” She also told the Telegraph that “first-time buyers will struggle to get on the ladder” although some lenders are starting to offer more choice of 90% LTV mortgages.

Finally, Ray Boulger of John Charcol’s highlights the effect that politics could have on interest rates in 2010. He told the Telegraph that “The main risk to the general expectation of low interest rates continuing throughout next year and beyond is that the general election produces a hung parliament or a Labour majority.”

The reason for this is that the UK’s credit rating could be downgraded as a result – but this is considered an unlikely scenario.