Interest Rate Update to 6 July 2011

UK Interest Rate: 0.5%

UK Interest Rates Forecast: Mortgage rates falling but criteria remain tight

Mortgage Choice Improving As Rates Fall

A new report from financial information site Moneyfacts.co.uk has found that there are currently 2,688 mortgages on the market – the largest number for two and a half years. This suggests that mortgage choice for house buyers is improving, but the reality is that a deposit of at least 10% is still mandatory for all but the most creditworthy of buyers.

The Moneyfacts.co.uk figures show that buyers with a 25% deposit have the largest choice of mortgages, with more than 800 deals on offer in the 75% loan-to-value band. Buyers with a 10% deposit now benefit from 261 possible deals, a considerable improvement on the 176 deals that were available for 90% loan-to-value buyers this time last year.

The good news is that competition and an expectation of continued low interest rates has resulted in further cuts to lenders’ mortgage rates. According to Moneyfacts.co.uk, the average interest rate for a two year fixed deal is now just 4.32%, while the average two year tracker is only 3.37%.


Bank of England Survey Shows Mortgage Availability Unlikely To Improve

The Bank of England’s latest Credit Conditions Survey has found that lenders have seen the availability of secured lending to households (primarily for house purchases) remain flat over the last quarter. However, lenders observed that demand did increase slightly in the second quarter of 2011.

Lenders responding to the Bank’s survey said that they had not seen the improvement they had expected in credit availability. Furthermore, lenders said that they expect the availability of secured credit to households to “remain unchanged” in the third quarter of 2011.

However, lenders did observe that the availability of mortgage credit for borrowers with a deposit of 25% or less had improved slightly, a trend that was expected to continue.