"The MPC will have had the advantage of knowing the key content in the quarterly inflation report to be released next week before reaching their decision today. The fact that base rate has been frozen suggests there was nothing in the report to significantly change current inflationary expectations. Although current economic growth is below the target level, and despite admitting they targeted house prices last year, Mervyn King has been keen to stress that the MPC is now focusing on inflation.
"The statistics from both Halifax and Nationwide indicate a modest improvement in the housing market since the August rate cut, although some of the housing bears are sticking to their guns. However, we expect to see a continuing modest improvement in house prices. The housing market has a crucial impact on consumer confidence, and consequently spending, and will continue to be an important factor in inflation expectations.
"As the world’s largest economy the US market has a significant impact on our economy. There are some early indicators that the increases in interest rates and the huge surge in the cost of oil are now beginning to impact on the strength of their housing market. With oil prices now some 15% off their peak of two months ago, although refinery capacity after the hurricanes is still a problem, the worst of the inflation threat from oil appears to be over."
What should borrowers do now?
Boulger continues, "There are still a few cheap two-year fixes available but there is now a greater rationale for considering trackers, allowing borrowers to benefit from the fall in rates which we expect to come in the New Year. We would strongly advise most homeowners not to chase fixed rates upwards as most now available represent poor value unless the next base rate move is upwards.. We expect to see cheaper fixed rates in the New Year."
Please see accompanying table (attached at end) for product suggestions. Rates frequently change and so if you wish to quote any deals mentioned on the table please feel free to check with the press office to see if they are still available.
Borrowers keen to see how much they could save on their mortgage repayments should either contact John Charcol on 0800 71 81 91 or post a copy of their existing mortgage offer marked clearly "Remortgage Check" to John Charcol, Holbrook House, 10-12 Great Queen St, London, WC2B 5DD. This service is obligation free and consumers are in no way required to act upon the recommendations given.
