The rate of
interest that you pay on your mortgage is determined by the
Bank of England, and the mortgage rates will go up or down
depending on any number of economic factors. The Bank of
England’s monetary policy committee agree on the interest
rates on a monthly basis, the economy as a whole is of major
interest to any body who owns their own property. One of
the major driving forces behind the UK interest rates is the
overall state of the UK economy, during periods of boom and
when the economy is growing people have jobs and savings
which can then be lent out to the borrowers through the
financial institutions. This in turn will enable more
people to borrow and the mortgage interest rates will, if
these trends continue, rise. It is important that the bank
of England keep good control over the level of the interest
rates, if there is too much borrowing then this can
destabilise the economy, on the other hand if there is not
enough then the reverse can happen and the markets
stagnate. Generally when the demand for funds is low then
the interest rates will fall. The mortgage calculator on this site will allow you to calculate monthly mortgage
payments based on your chosen mortgage rates. The mortgage calculator is a pretty useful tool which instantly calculates your
mortgage payments.
If we take a
look at the market today the current mortgage rates are
determined by the base rate of interest and this is set at
5.25%. This is not a high rate of interest however the UK
economy has been enjoying great success over the last few
years and enjoyed a low of just 3.5% from July to October
2003. The UK home owner during this period would have been
enjoying the best mortgage rates of interest, compare this
to the mid to late 1980s where the base rate of interest
was hovering around 15% which is very high and usually
signifies that there is or was a recession. Inflationary
factors will also have a large influence on the amount of
money which is loaned out and ultimately affect the mortgage
rates, generally if there is uncertainty within the economy
and inflation looks to be on the increase then the lenders
will be more reluctant to lend money during that period of
time and the lender will be looking to increase their rates.
In short this means that inflation drives interest rates
higher and in turn you will be likely to see an increase in
your current mortgage rate.
The UK
economy though is not the only influence behind our mortgage
interest rates, international economies can play a huge role
in what happens within our own country. Just recently the
US markets have seen a large element of uncertainty within
the housing sector which has led to a property price crash.
The cause of this decline is fundamentally attributed to the
sub prime lenders and the investment banks, and the increase
in the exposure to bad mortgage debt. Some of the largest
investment banks in the world have been hard hit by these
problems to the tune of over eighteen billion pounds. This
has sparked an overhaul of how the banks have financed their
lending for mortgages in the US and has had a direct effect
on the UK markets. The US Federal Reserve took the steps to
lower their mortgage interest rates by three quarters of a
percent to try to boost the economy, due to the problems in
the US the world economies had to react. As mentioned
previously the UK lowered the interest rates and it is
widely predicted that the UK mortgage rates could well drop
to as far as four percent over the next 2 years.
In the next
few months it is widely anticipated that the Bank of England
will be looking to cut the interest rates lower maybe down
by another quarter of a percent to 5%. This will be a
welcome relief to thousands of the UK homeowners who are
experiencing ever increasing cost levels in the basics of
life such as fuel and food. If the rate does come down
to 5% then this will be the best mortgage rates since
November/December 2006. The threat of a recession has
forced the bank of England to lower the rates with
affordability a real issue for many people the interest rate
cuts will provide some breathing space. The markets however
still remain in a state of change and anything could happen
and we are far from seeing the best mortgage rate when the
base rate of interest was at 3.75%. The
uncertainty in the markets does not directly affect anybody
who has taken out a fixed
rate mortgage, however there are expected to be many
thousands of people who were on a five year fixed rate mortgage deals that may have enjoyed interest rate payments of 4%
that will becoming to the end of their terms. To view the rest of the
article click mortgage rate
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