“Today’s decision was widely predicted. However it’s likely there were still factors pulling the MPC’s decision-making in different directions. Control of inflation is the sole target of the MPC, but inflation is steady, well below target and showing few signs of increasing significantly. No doubt, the key factors in today’s rate rise would have been the continued strength in consumer spending and house prices. Ultimately, this modest rise is testament to the returning strength of the economy.”
“Borrowers need to keep this (and further potential modest rises in Base Rate this year) in context and not be overly concerned. Base Rate is still very low in historic terms and is likely to remain so for the forseeable future. The benefit of low mortgage rates is still to be had. Borrowers may just have to be more alert and hunt out the best of the bunch.”
What should borrowers do now?
Boulger concludes, “Even after today’s rise, generally the best value mortgages are still trackers and discounted deals. Despite the likelihood of rates rising further in the coming months, most fixed rates look expensive as they are already priced to reflect the City’s expectations of Base Rate rising to 4.75-5% over the next year. However for those who prefer security, there are still a few attractive fixed and capped rates available. (see table).”
