Interest Rate Update to 7 September 2011

UK Interest Rate: 0.5%

UK Interest Rates Forecast: Low mortgage rates likely to continue

UK Average Mortgage Rate Falls To 3.68%

The average UK mortgage rate fell to just 3.68% in July from 3.84% in June, according to the Halifax. The mortgage lender said that falling mortgage rates were improving affordability for borrowers "that can raise a sufficient deposit to buy a home".

With rental payments typically higher than equivalent mortgage payments, deposit requirements are now the biggest hurdle faced by new borrowers, especially first-time buyers or those who bought from 2007 onwards and have not been able to accumulate any equity in their current property.

Mortgage Lending Rises in July

Bank of England figures show that mortgage approvals rose by 2.5% in July, with new mortgage approvals for house purchase rising from 48,500 in June to 49,239 in July. Remortgaging approvals also rose fractionally, from 30,790 to 30,810.

Total mortgage lending by value rose by £0.7bn from June to July, below the previous six-month average increase of £0.9bn.

The Return of the 100% Mortgage

The 100% mortgage has returned to the market, albeit with strict conditions. The three year fixed-rate deal, which is being offered by one specialist lender through certain mortgage brokers, requires the mortgage to be guaranteed by a family member, who must prove they can afford the monthly payments.

In addition, the borrower must be over 25 and also be able to prove they can afford the monthly payments. The guarantee requirement stays in place for ten years or until the remaining borrowing has fallen below 75% of the value of the property.