Policymakers play safe with Base Rate.
Today’s decision by the Monetary Policy Committee (MPC) of the Bank of England to keep interest rates on hold at 0.25% will come as no surprise, as policymakers remain in ‘wait and see’ mode as Britain prepares to break away from the EU.
Although the Prime Minister Theresa May has announced she will not trigger Article 50 to begin taking Britain out the EU until next week at the earliest, many rate-setters on the MPC are concerned about the economic uncertainty caused by the upcoming Brexit negotiations.
It is thought that the most likely date will be the last week of March, following the special summit of the remaining 27 member states in Rome on March 25 to mark the 60th anniversary of the European Union.
However, there is little certainty of what the upcoming negotiations will mean for the future of the UK economy, given the woefully inaccurate forecasts ahead of last year’s Brexit vote.
The Bank will be closely watched for its views on the way ahead for growth and the pound, but has said that it wants to keep a steady monetary path until the impact becomes clearer.
Britain's economy has so far confounded any expectations for a slowdown amid political turmoil, with the latest forecasts from the Office for Budget Responsibility (OBR) showing a sharp upward revision to its outlook for UK gross domestic product (GDP) this year from 1.4pc to 2pc.
Will interest rates go up or stay down?
A year ago it was predicted that the BOE would raise interest rates at the start of 2017. But weak economic data, falling prices (negative inflation), concerns over a slow-down in the global economy, and the vote to leave the EU meant that the UK economic outlook deteriorated so much that the Bank of England decided to cut interest rates in August 2016 from 0.5% to 0.25%, with an interest rate rise now thought unlikely to occur for years -possibly not until 2019.
What effect will the Base Rate decision have on contractor mortgages?
At the moment the mortgage market doesn’t appear to have been effected by the budget or the UK’s decision to exit the EU, with the number of new mortgage options increasing over the past 6 months, with interest rate levels decreasing across all product lines.
However, the Base Rate remaining static at 0.25% isn’t all good news for borrowers. Research has shown that a quarter of lenders are still failing to pass on the low rate to their customers, meaning borrowers with a lender’s Standard Variable Rate (SVR) may be losing out. Also worth noting for those borrowers considering longer term fixed options, is that the cost of 5-10 year fixed rates may start to rise in 2017/18.
For borrowers looking to remortgage or buy a property there are still some extremely competitive deals on the market, with record low rates, the self-employed and contractors are no exception to these offerings.
Simon Butler, Associate Director, at Contractor Mortgages Made Easy commented;
“For clients looking to remortgage or obtain their first home, now may be an especially good time to consider the competitive deals on offer where monthly savings may prove considerable. For those with substantial savings which are earning low interest rates, it may be an opportune moment to consider whether an Offset mortgage may be suitable to your circumstances.”
How Contractor Mortgages Made Easy can help.
If you’re looking to secure a better rate or simply want to save money by moving away from your current lenders SVR, Contractor Mortgages Made Easy have access to over 2,245 rates, with 42% of those exclusive to us.
Whether you want to fix for 2 years or offset your existing savings against your mortgage, our Senior Mortgage Consultants have the expert knowledge to deal with your situation as a contractor, whilst ensuring you get the best deal from the whole of the current market.
With Contractor Mortgages Made Easy, you’ll be able to borrow up to 5.49 times your annualised contract rate, with no company accounts needed.
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