Interest Rate Update to 30 December 2009

UK Interest Rate: 0.5%

UK Interest Rates Forecast: Rises possible towards the end of 2010

Bank of England MPC Unanimous in December Decision

The Bank of England’s Monetary Policy Committee was unanimous in its decision to leave both interest rates and the Bank’s quantitative easing policy unchanged in December. With the economy showing signs of stabilising, the likelihood is that this situation will continue in January, too, as the MPC waits for new economic data to become available in February.

The MPC decided that “the lack of significant news on the month meant that the case for deviating from the programme of asset purchases announced in November was outweighed by the benefits of completing it as planned”.

RICS Expects Rate Rises in 2010

RICS, the UK’s trade body for chartered surveyors, has indicated that it expects the Bank of England to raise the base rate in 2010. RICS said that it expects rates to be raised “at least once if not a second time towards the tail end of the year.”

For homeowners, an increase in the Bank of England base rate can only have one meaning – mortgage rates will increase and anyone on a tracker mortgage will see an instant increase in their monthly payments.

Those with variable rate mortgages are also likely to see an increase in their mortgage interest rate. Although most lenders’ variable rates are not strictly tied to the Bank of England Base Rate, it seems unlikely that lenders would turn down an opportunity to increase their variable rates, many of which are currently at historically low levels.