Boulger continues: “The MPC probably feel they are between a rock and a hard place, with the housing market showing renewed strength and consumer spending still buoyant, but other sectors, particularly manufacturing, struggling to make much headway. Furthermore Sterling remains strong against the dollar and is improving steadily against the Euro. With the ECB and the Fed unlikely to increase rates in the near future, and speculation about a drop in the ECB’s current 2% rate, it is unlikely the Bank of England will want to widen the interest rate gap too far. This is one factor likely to restrain the amount and speed of Base Rate increases in the UK.”
What should borrowers do now?
Boulger concludes, “The best value is still to be found in discount or tracker mortgages unless Base Rate increases to over 5%. However, some borrowers will consider it is worth paying the higher initial price of a fixed or capped rate for the security and peace of mind they offer, despite some of the best fixed rates having been re-priced upwards this week ”
