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Keep tabs on the mortgage interest rate in the UK

With an ailing economy trying to claw its way out of recession, the mortgage interest rate in the UK is at an all-time low. This isn't all good news for borrowers though. The only way is up, and there is no doubt that these interest rates will have to rise. The important question is when?

UK mortgage interest rates follow the percentages established by the Bank of England Base Rate. This is determined by the Bank of England committee that meets every month.

At the beginning of 2011 it was widely assumed that there would be some upwards movement in the bank rate this year. The slow economic growth though has deterred the committee from making any changes, and most experts are predicting that it will be well into 2012 before interest rates rise again.

If the Bank of England follows the American policy, it might well be reasonable to expect very low interest rates to remain in force for the next 2 years at least, while the economy recovers.

The base rate sets the bottom line for the mortgage interest rate in the UK, although this can vary considerably from lender to lender, depending on the type of mortgage and size of deposit, among several other factors. If you have a tracker mortgage though, it pays to take a close interest in any base rate changes, as a 0.5% increase in the base rate would have a substantial effect on your monthly repayments.

A fixed-rate mortgage buys you peace of mind for the term of the mortgage, although the lenders tend to fix their rates with rising base rates in mind. The advice is always to shop around for the lowest rate and act quickly, as the real bargains don't stay around forever.

 

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