Base rate held at 0.5%
The Bank of England has announced that the base rate will remain on hold at 0.5% in January.
Low interest rates are to continue despite the Consumer Prices Index measure of inflation increasing to 3.3% in November, well above the Bank’s 2% target, and likely to increase further with today’s rising commodity prices and January’s VAT increase to 20%.
However, the news will be welcomed by the UK’s borrowers and homeowners in particular, many of whom have reverted to lenders’ relatively attractive standard variable rates when coming to the end of fixed-rate deals.
But a rise in the base rate is inevitable at some point and mortgage borrowers have recently been challenged to shed the low interest rate mentality encouraged by the base rate having remained at a record low since March 2009.
According to new research from unbiased.co.uk, today’s mortgage borrower is only prepared to enter a fixed-rate deal if the interest rate is around 3.3%.
The professional advice portal therefore suggests the emergence of a “rate-spoilt” generation as back in January 2009, a rate of 4% would have appeared attractive, given that fixed-rate deals peaked at around 7.8% at the end of 2007.