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The Bank of England left interest rates at 0.5% percent for a 12th month in a widely expected move this March, and kept the scale of its asset purchase programme unchanged at 200 billion pounds. Monetary policymakers first cut the base rate to 0.5% - the lowest in its 300-year history - in March 2009.
There are still risks in both directions when it comes to the outlook. Though inflation rose to 3.5% in January, the Monetary Policy Committee (MPC) is concerned about the effects a rate rise could have on the fragile economic recovery. Deciding when and how to act will pose considerable challenges.
Central banks around the world are considering their ongoing stance as the downturn has continued to effect most countries. The US Federal Reserve has kept interest rates at a record low of 0% - 0.25% whilst in Japan rates stand at just 0.3%. In the Eurozone they remain at 1% - another record low.
In this current unprecedented interest rate environment, although it is difficult to be definitive when recommending, we consider shorter-term products to be the best value as most economists believe that UK interest rates will remain low for longer than first anticipated. With new lenders entering the market, therefore more competition around, products can only become more competitive throughout the next 12 months. It is also worth watching out for when the money markets hit the bottom of the cycle to provide low longer-term fixed rate products.
However, with interest rates at their lowest MMG have introduced a stand-alone interest rate cap which provides borrowers with a potential answer to the “Fix or Float” conundrum, or allows those on low reversion rates to add security without compromising their current mortgage terms.
This product allows clients to continue to benefit from the low Base Rate but have protection in place should rates rise quickly in the future. It is worth noting that some economists are estimating that Bank of England Base Rates could reach 6.5% over the next 5 years.
THESE ARE MMG'S OPINIONS AND SHOULD NOT BE CONSTRUED AS ADVICE
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