Interest Rate Update to 27 July 2011

UK Interest Rate: 0.5%

UK Interest Rates Forecast: Low rates likely to persist into 2012

Bank Mortgage Lending Rises By 1.8% in June

Net mortgage lending by UK banks (excluding building societies) rose by 1.8% in June, according to the latest mortgage lending figures from the British Bankers' Association (BBA).

The BBA found that the number of mortgage approvals for house purchase rose from 30,803 in May 2011 to 31,747 in June 2011, while the number of remortgaging approvals rose from 21,967 in May to 24,080 in June.

The average value of a house purchase mortgage rose from £147,700 in May 2011 to £149,700 in June, while remortgage values saw a slightly larger increase; from £126,600 in May to £132,300 in June.

In total, net mortgage lending rose by £0.5bn in June – a much smaller increase than the £1.1bn increase seen in May 2011.

Leading Mortgage Lenders Cut Fixed Rates

Several of the UK's largest mortgage lenders have announced interest rate cuts on popular fixed-rate mortgage products. One lender this week announced cuts of 0.3% on its most popular fixed-rate deals.

There are now a number or mortgage lenders offering 2-year fixed rate of less than 2.9%, highlighting both renewed competition in the mortgage market and lenders' growing confidence that the Bank of England is unlikely to increase rates anytime soon.

Rise In Capped Mortgage Deals

The number of 'capped' mortgage deals – variable rate deals with a capped maximum interest rate – has risen markedly over the last two years, according to financial information website Moneyfacts.co.uk.

Two years ago, there was just one capped deal on the market – there are now 39. Capped mortgage deals work by offering a variable rate with a capped maximum rate, above which your mortgage rate will not rise under any circumstances.