UK interest rates kept on hold at 4.5 per cent

Jennifer Lowe

June 8, 2006

Ray Boulger of mortage broker John Charcol says that today’s freeze was virtually a done deal, with the same expected in July.

He comments: “Although industrial production and retail figures have remained resonably good over the past month, many markets have had a very volatile period, partly because of nervousness over US interest rate policy.”

Boulger says: “In the last month we’ve seen a flurry of activity in the tracker market with several banks and building societies coming out with some excellent value deals as the previously popular fixed-rate mortgages have slipped down the popularity list.

“Base Rate would now need to rise by 0.5 per cent before the rate payable on today’s best trackers rises to the level of the best fixed rate mortgages. For borrowers who don’t need the pay rate certainty offerd by a fixed or capped rate, but would like a fixed or capped rate if they felt the rate was attractive enough, a tracker with a drop-lock option remains attractive.”

Drop locks offer the borrower the option to fix their mortgage at a time of their choosing and are ideal for borrowers who like the idea of a fixed rate, but expect rates to fall over the next year or so.

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