The Bank of England are unlikely to raise interest rates this year due to market forces sending mortgage rates for borrowers to record lows.
Interest rates are expected to remain at 0.5% as the governor of the Bank of England, Mark Carney, has indicated that market forces will prevent policymakers from raising rates.
Fears of global economic slowdown and volatility on equity markets mean investors now expect interest rates to be kept on hold until 2019 and there is a one in two chance the Bank of England could decrease rates this year.
For mortgage borrowers such as first time buyers, home movers, remortgage buyers and buy-to-let landlords they can expect more competitive mortgage deals during 2016.
Mortgage lending higher
The Bank of England data shows that mortgage lending was £18 billion in December 2015, lower than the £18.7 billion in November but significantly higher than the same month a year ago.
Borrowing increased from £10 billion last year to £12.3 billion with remortgage buyers representing £4.8 billion. There was also another £918 million releasing capital with the same lender for home improvements such as an extension, new kitchen or bathroom.
Figures shows mortgage interest rates has reduced to 2.99%, the first time it has been lower than 3.0% during the 16 years the Bank of England has collected data.
Even the equity release mortgage buyer can secure fixed rates typically from 5.8% upwards without any evidence of earnings, important for borrowers with only pension income.
This compares with the average mortgage interest rate of 3.18% a year ago and 5.82% in October 2008 before the Bank of England started to reduce interest rates.
Interest rates expected to remain low
The Economist Intelligence Unit (EIU) has forecast interest rates will remain unchanged until 2020 and Lord Turner, former chairman of the Financial Services Authority also believes interest rates will not exceed 2.0% by the end of the decade.
With lower interest rates home movers have the opportunity to make overpayments, reducing the loan to the lender and total cost of the mortgage.
Market analysts now believe there is a 50/50 chance the Bank of England will decrease interest rates this year.
If this is the case it would mean low cost mortgages for first time buyers, home movers, remortgage buyers and buy-to-let landlords until the end of the decade.
The EIU have said that the UK market has suffered an unresolved structural weaknesses preventing wages from increasing, undermining a UK recovery.
This combined with the Federal Reserve and Bank of England’s delay of raising interest rates, growing China debt with an expected downturn in the US in 2019 suggests the next increase in interest rates will not occur until 2020.
What are your next steps?
Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or are a buy-to-let investor.
Start with a free mortgage quote or call us and we can take your details. Learn more by using the equity release calculator, mortgage costs calculators, and property value tracker chart.
For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to maintain your lifestyle or even give to a family member.
Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.
