Interest Rate Update to 4 August 2010

UK Interest Rate: 0.5%

UK Interest Rates Forecast: No change expected in August

Bank Rate Expected To Remain At 0.5%

A survey of 59 economists by financial news specialists Bloomberg found that all of them expect the Bank of England to leave the base rate unchanged at 0.5% in August.

The Governor of the Bank, Mervyn King, appeared to support this view in recent comments made to a parliamentary committee. King said that "wider economic problems around the world underline the fact that we cannot be confident that the recovery … here in the UK will be sustained."

King suggested rates might remain low for some time, saying that "I fear there is some considerable distance to travel before we can begin to use the world 'normal'."

Mortgage Rates Stay Low – But Deposits Stay High

The latest data on the mortgage market shows that mortgages continue to be far harder to get than they were before the credit crunch. Of course, some people would argue that they were too easy to get before the credit crunch – but that doesn't lessen the problems faced by thousands of would-be homebuyers, who can't find the large deposits that are required for the best mortgage deals.

According to the latest data from Moneyfacts, 60% of UK mortgage deals require a deposit of at least 25%. This does represent some improvement, however – according to Michelle Slade of Moneyfacts, many of these deals previously required 40% deposits.

Borrowers with a 10% deposit can only choose from 8% of the mortgages on the market and such borrowers usually have to pay higher rates, too. There is one glimmer of good news, however – the number of mortgages on the market has risen by 66% since January this year, suggesting greater choice and competition is gradually coming back to the mortgage market.