Interest Rate Update 17 August 2011

UK Interest Rate: 0.5%

UK Interest Rates Forecast: Low rates to continue for next year

Bank of England MPC United On Rate Hold Vote

The Bank of England's Monetary Policy Committee voted unanimously to leave the Bank Rate unchanged at 0.5% in August. This is the first time all members of the committee have voted in favour of leaving the rate unchanged since May 2010, providing a clear indicator of the change in the committee's economic outlook.

It now seems likely that the Bank Rate will remain unchanged for most, if not all, of 2012.

Mortgage Rates Plumb New Depths

A low Bank Rate may be bad news for savers but it does bring relief to hard-pressed homeowners, many of whom are living in fear that their mortgage rates will rise.

According to Moneyfacts, fixed mortgage rates are now at their lowest ever level. The average five-year fixed mortgage rate is now just 4.99%, the lowest ever recorded since Moneyfacts started recording rates in 1988.

The average two-year fixed rate has fallen to just 4.24% while the average three-year fixed rate currently sits at 4.74%. Michelle Slade, spokesperson for Moneyfacts, comments: "Lenders are trying to tempt borrowers off variable rate deals and onto fixed rate deals as they are concerned about some borrowers' ability to repay their mortgages when rates finally start to rise."

According to Moneyfacts, a borrower who signed up for a five-year fixed rate mortgage in September 2009 will be paying an average of £117 more per month than someone signing up for five-year fixed deal today.