Interest rates were held at 0.1% again in May, but the Bank of England upgraded its economic growth forecasts for this year, predicting the strongest growth since the Second World War. The Bank of England’s Monetary Policy Committee voted unanimously to leave rates unchanged and said that the economy is expected to recover to its pre-pandemic levels in 2021, expanding by 7.25%. This is due to falling numbers of Covid cases in the UK, the ongoing vaccination programme and the easing of lockdown measures which is helping boost consumer spending. The Bank said it expects the unemployment rate to peak at 5.5% later this year, down from its 7.75% prediction in February, helped by the extension of the government’s furlough scheme which finishes in September. However, the longer-term outlook is less clear, especially given the rising number of Covid-19 cases in India and some other economies. “The outlook for the economy, and particularly the relative movement in demand and supply, remains uncertain,” the MPC minutes said. “It continues to depend on the evolution of the pandemic, measures taken to protect public health, and how households, businesses and financial markets respond to these developments.”
What this means for your mortgage
Mortgage borrowing reached an all-time high of £35.6 billion in March, according to Bank of England data, with homebuyers taking advantage of current low rates and the Stamp Duty holiday to keep their costs down. Mortgage approvals stood at 82,700, up just over 13% on February but lower than the peak of 103,100 recorded in November last year. Two-year fixed rates lower than 1.1% are currently available for both homebuyers and those looking to remortgage, with the best rates reserved for those with substantial deposits or a significant amount of equity to put down if remortgaging. However, even though the base rate hasn’t changed, there are no guarantees that rates will remain this low in the months to come, so if you’re thinking about buying or remortgaging, you may want to consider looking for a mortgage deal sooner rather than later.
