Ray Boulger, senior technical manager at Charcol said: "Today’s Base Rate freeze comes as no surprise with concerns over consumer debt levels in the UK continuing to make the headlines and the housing market in the South showing further signs of recovery. The market is now factoring in a rate rise before the end of the year but, as in March this year, we think this could well be premature."
Boulger continues, "There are still significant risks to the economy and in view of the increasing problems in at least two major European economies a lot will depend on the US. The rate on their traditional 30 year fixed rate mortgages has increased from 4.9% to 6% in the last two months. Such significant change in a short amount of time could well prove counterproductive and the expected US economic recovery remains tentative. UK money markets have followed suit by pricing in a potential rise in Base Rate, resulting in higher rates on UK fixed rate mortgages. As a result most fixed rates are already looking expensive when compared to their tracker and discount counterparts."
What should borrowers do now?
It is hard to second guess what the next move for interest rates will be. Tracker and discounted deals now look more attractive than most fixes, although there are still a few cheap fixes on offer. However some people will always prefer the security of fixed monthly payments that only a fixed or capped rate can provide and so these deals should not be ruled out altogether, but need to chosen very carefully.
