Average fixed rates hit all time low levels

No-one expected the central policy setters to make any changes to the Bank Base Rate during their July meeting in spite of inflation being at close to five per cent. No-one could accuse the Monetary Policy Committee (MPC) of inconsistency, as for the 28th consecutive month they have once again retained the bank base rate at 0.5 per cent.

The economy has grown by a less than impressive 0.1 per cent in the three months to the end of June and this, together with a continued squeeze on household incomes arising from the unrelenting rise in the cost of living, will have been a factor in determining that the economy is not yet in a position to cope with any increase in the cost of borrowing.

Notwithstanding the wider economic climate, mortgage lenders are doing their best to offer new and existing borrowers some very competitive mortgage products. Moneyfacts recently commented that two, three and five year average fixed rates having reached all time low levels.

Average mortgage rates for two and five year fixed rates have fallen back further in July from June by 0.08 per cent and 0.28 per cent and now stand at 4.36 per cent and 5.16 per cent respectively. Average two-year tracker rates picked up marginally to 3.5 per cent in July, recording a small rise of 0.12 per cent from June, but still below where they were at the same point in 2010.

Lenders continue to show a greater appetite to lend by increasing the number of products to an average of more than 7,400 during June, an increase of more than 3 per cent over May.

This increase in supply and product choice provides some positive news for new and existing borrowers alike and means that those buyers and remortgage customers looking to enter the market even in this tough economic environment, can do so, knowing that this is one element of their spending where costs for many are falling.

For further information on how the latest base rate decision affects you, please call Fiona Harpham, 01926 436113 fionah@mab.org.uk or Nick Shergold, 01926 436103 nicks@mab.org.uk

Fiona Harpham and Nick Shergold