A recent report says that people in the UK are becoming more confident in variable-rate mortgage products. This comes after a long time when people tended to avoid variable-rate products in favour of more stable, but more expensive, fixed-rate deals. Between August 2006 and July 2007, interest rates went up five times. As a result, many homeowners tried to switch to fixed-rate mortgages to avoid the effects of further rate increases. First-time buyers also chose fixed-rate mortgages to avoid the problems of rising payments in the first few years of a mortgage.
But since July of this year, the Bank of England has kept interest rates at 5.75 percent. In fact, it just said last week that it would keep rates the same. People think that the Bank of England decided to keep rates the same in part because of the possible effects of the global credit crunch on the UK economy. Because of this, the Bank of England is taking a "wait and see" approach. Experts say that another reason to keep rates the same for now is that CPI inflation is now within the government's target of 2%, coming in at 1.8 percent, which is the lowest it has been in a year.
Analysts and economists think that the Bank of England won't raise interest rates again for the rest of the year. This has made people in the UK interested in variable rate mortgages again, and many of them are breathing a sigh of relief that their payments won't change if interest rates go up again this year. This renewed interest has been fueled by rumours that interest rates could even go down by the end of this year. Many economists are expecting or urging the Bank of England to cut interest rates, which has led to more speculation. Now, many people think that rates will go down by at least a quarter point by the end of the year.
Recent months have seen the most interest in fixed-rate mortgages, as homeowners and first-time buyers tried to find a way to deal with the problem of rising payments caused by rising interest rates. But some experts say that interest rates could go back down to around 5% by the end of next year. Because of this, many people may not want to lock themselves into more expensive fixed rate deals for fear that they will end up paying way more than they should in six or twelve months.
