Interest rates held at 0.5%

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• Published: 10 Dec 2009 in Money and General

Yet again, the Bank of England has just announced that interest rates are being held steady at 0.5 per cent, which means there has now been no change made to the Bank of England Base Rate (BOEBR) for nine consecutive months.

The Bank of England’s Monetary Policy Committee – which meets monthly to discuss whether to hold, increase or decrease the Base Rate – has been holding interest rates steady in the hope that it will help stimulate the mortgage market and economic recovery.

The current low interest rate of 0.5 per cent compares with a Base Rate of 2 per cent in December 2008, and 5.5 per cent in December 2007, and has meant that many borrowers with mortgages linked to the BOEBR have benefitted from cheaper mortgage repayments.

Even better, is that now it looks as though there is even more good news for borrowers and those wanting to take their first steps on the housing ladder with house prices reportedly rising and mortgage lenders offering more competitive deals.

House prices begin to rebound

There is no denying that house prices fell over the course of the credit crisis, and according to the Nationwide house price index, from the period the credit crisis set in until February 2009, property prices in the UK had fallen 17.6 per cent.

Now though, house prices appear to be rebounding with latest data from the Halifax suggesting prices in November rose for the fifth consecutive month, bringing the average house price to £167,664, the highest level since October 2008.

Banks becoming more willing to lend

At the same time, banks appear to be more willing to lend, and are giving the seal of approval to an increasing number of mortgage applications. In fact, the latest Bank of England trends in lending report shows an uplift in mortgage approvals for house purchase in October, as well as improvements in gross mortgage lending to first time buyers and home movers. Though, mortgage lending for buy-to-let purposes still remains subdued.

How does this translate to mortgage products for consumers?

Those looking to either get onto the property ladder for the first time, move house or even take equity from their home,  should take heart from the fact that the number of mortgage products available is now also on the increase.

In the last eight months since the bank Base Rate has been kept on hold, the total number of residential mortgages available has increased from 1,209 to 1,624, with the majority of new products coming into the market being two year fixed rate deals.  There has also been a rise in the number of three year fixed rates, with there now being around 352 deals available to borrowers.*

What about loan-to-values and deposit requirements?

The move by lenders to higher loan-to-values has been a slow one, but there has been an improvement in the lending rates available at higher loan-to-values of late.  Lenders such as the Newcastle, Nottingham and Coventry building societies have all recently increased the maximum loan-to-value to 90 per cent on a limited range of mortgage deals, meaning those with only a 10 per cent deposit have an increasing chance of getting a mortgage.

So, if you are feeling optimistic and want to dip you toe into the mortgage market, we’ve put together some of what we consider to be the best mortgage deals currently available in the market.

Company	Mortgage Type	Initial Rate	Scheme Period	Subsequent Rate	Overall cost for Comparison	Max. LTV	Arrangement Fee	Availability
Accord	2-year fix	5.99%	31/01/2012	5.99%	6.30%	85%	£95	Only available through certain brokers
Scottish Widows	2-year fix	5.99%	31/01/2012	3.99%	4.50%	85%	£0	Professional mortgage
Leeds	5-year fix	5.74%	28/02/2015	5.49%	5.90%	85%	£999	Direct only
Yorkshire BS	Base Rate + 3.99%	4.49%	31/01/2012	4.99%	5.10%	85%	£495	Direct only
HSBC	Base Rate + 4.69%	5.19%	For term	5.19%	5.40%	90%<	£999	Direct only

Data provided by London & Country Mortgages - Early repayment charges may apply

Notes
*Source Moneyfacts