UK interest rates continue at their record low rate of 0.5% leaving them now unchanged for 27 consecutive months. Against a background of weak economic growth coupled with continued uncertainty on the outlook for the global economy this decision to leave rates on hold was widely expected.
Although economists anticipated this decision, inflation is still rising above the Bank of England`s two per cent target rate. Therefore with inflation continuing to rise alongside people`s household bills, experts predict that interest rates will start to rise in the 1st half of 2012.
Personally I feel that any rise in interest rates in 2012 would be quite modest (market expectations recently were predicting a base rate of 0.75% come June 2012 according to Barclays) but understandably many consumers on a tight budget are nervous at the prospect at the cost of borrowing increasing.
With an interest rate rise predicted in the near future, anybody with a mortgage may be considering changing to a fixed rate deal in light of the outlook. Fixed rate mortgages are fixed at an interest rate for a set period of time and do not change even if the Bank of England rate rises.
Typically fixed rates are between two and five years and then the mortgage reverts to the variable rate for that lender. The main positive of a fixed rate mortgage is that you are protected against any potential interest rate rises for a set period. If interest rates continue to rise then you are well placed to be able to put together a financial plan for when the set period ends to meet payment.
One disadvantage of a fixed rate mortgage is at present these products are priced higher than mortgage products that are not fixed so should interest rate rises be delayed further than 2012 it might work out cheaper to have not opted for a fixed rate.
Many fixed rate mortgages also incur large setup costs of typically around a thousand pounds for the best rates so this cost would not to be weighed against the benefits which a good independent mortgage broker such as myself could do for you.
When considering a fixed rate mortgage somewhere like www.moneysupermarket.com is a good reference point although in order to establish what type of mortgages might be suitable for you personally and to establish if you fit a particular bank or building societies lending criteria, please call me on 01279 721706 or 07796 271801 or email firstname.lastname@example.org
Your home may be repossessed if you do not keep up repayments on your mortgage.