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February 2010

Interest Rate Outlook 2010

Last week Halifax announced that house prices rose again for the seventh successive month. It really does seem that the worst of the recession could be behind us.

The only downside of any recovery in the housing market is that interest rate rises are once again on the horizon. In fact Barclays predict that Bank of England Base Rate will rise in the second half of the year to reach 1.25% by December and although that is a reflection of a more positive economy, it could also spell disaster for all those thousands of homeowners who are currently enjoying historically low variable rates on their mortgages.

It is likely that the vast majority of these homeowners will try to switch to a fixed rate, however not everyone will be offered the most attractive deals. Lenders have become very “risk averse” and so they price their products according to the loan to value ratio (LTV) – this means how much you want to borrow as a percentage of how much the property is worth.

Where you have plenty of equity and the LTV is low, then a two year fixed rate will be under 4% but if you have little or no equity in the property then the rates are much higher and your choice is very limited indeed.

Whatever your circumstances the best advice is to make sure you shop around or simply speak to an independent mortgage adviser who will be happy to do that for you.

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