New Era of 1% Interest Rate Mortgages Could Be On The Way

A lowering of the Bank of England’s base interest rate could stoke competition amongst mortgage providers, leading to interest rates of 1% or even lower.

Customers may soon be able to take advantage of even lower interest rates on fixed-rate mortgages as competition, encouraged by the Bank of England leads them into record territory.

In an attempt to boost the housing market following the vote for the U.K. to leave the E.U., the Bank of England’s base interest rate was cut to just 0.25% in August. Economists predict a further cut, perhaps to as low as 0.1% to come in November.

Competition Amongst Lenders

H.S.B.C. has positioned itself as a leading figure in the movement towards 1% mortgage interest rates. The bank is already offering a mortgage rate of 0.99% over a period of 2 years, however, to access this, customers must pay a deposit of at least 35%.

Analysts at Bernstein, a research company based in the City predict further rate cuts amongst the competitors in the mortgage market, arguing that for these companies, attracting new customers will be relatively cheap.

Standard, 2-year fixed-rate mortgages are forecast to go as low as 1.1% with the sub 1% interest rates available to customers with good credit ratings. Bernstein state that “if your credit rating is fine, you are probably going to get a cheaper mortgage from either a bank with excess deposits (H.S.B.C., Royal Bank of Scotland) or ones desperate to grow their book — that’s sub 100 basis points (1%).”

Boost To The Housing Market

David Hollingworth, from the mortgage brokers London and Country sees further cutting of the Bank of England’s base rate as something that can fuel greater market activity. According to the latest figures from the property website, Rightmove, house prices are currently up 4% on the last 12-months.

For Independent Mortgage advice please contact us at Hoskin Mortgages for more information.

Clare Allen.

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