Interest Rate Update to 8 December 2010

UK Interest Rate: 0.5%

UK Interest Rates Forecast: Base rate will remain unchanged in December

Mortgage Rates Remain Competitive

This week has seen news that another major lender has cut the rates on some of its most popular mortgage products. The new package of deals includes a 3-year fixed, 85% LTV deal with an interest rate of 5.69%.

Another new product that has come to market this week offers a 3-year fixed interest rate of just 3.45% for those with a 25% deposit, while those with just a 20% deposit can benefit from a 3-year rate fixed rate of 3.89%.

BoE Rate Set To Leave Base Rate Unchanged

The Bank of England's Monetary Policy Committee meets this week to take its monthly decision on interest rates. The vast majority of economists expect the MPC to leave the base rate unchanged at 0.5%. Current uncertainty over unemployment and economic growth prospects seems almost certain to override any concerns about rising inflation, which most believe will gradually moderate over the course of next year.

A recent poll of economists by Reuters found that the majority expect the base rate to reach 0.75% by the end of 2011 – that's just one increment up from its current level. This is a reduction to the economists' previous position, held less than a month earlier, when they believed that the base rate would reach 1% by the end of 2011.

Despite this, interest rates are now expected to stay at their present level until at least October 2011. Just nine of the 67 economists surveyed believed that rates would rise before June 2011.