“Continuing concern over oil prices and strong economic figures, along with uncertainty about the economic and political impact of a strong showing by the UK Independence Party at today’s European elections, are just some of the factors likely to have persuaded The Bank of England to take a cautious stance by increasing Base Rate this month.
Although some further rises are very probable, there is now a strong case for a reasonable period of stability, to allow the impact of the cumulative 1% increase over the last seven months to be properly assessed.”
What should borrowers do now?
Boulger continues, “The money markets expect interest rates to peak at around 5.5% next year and lenders have already factored both this and future expected rises into today’s fixed rate deals. Today’s rise therefore shouldn’t panic borrowers into taking a fixed rate. They should consider what type of product suits them best.”
“Overall, capped trackers look better value than most fixed rates at the moment, although there are only a few such products on the market. Whilst the initial payrates on these deals are around 0.5% higher than for standard trackers, borrowers are protected from interest rates rising further than expected, and instead of being locked into a fixed rate should benefit once interest rates start to fall again.”
