Interest rates were held at 0.1% again in May. However, the Bank of England (BoE) has upgraded their economic growth forecasts for this year. The new forecast from the BoE has predicted that 2021 will be the strongest year of growth, since the Second World War!
A unanimous vote was carried out by the Bank of England’s Monetary Policy Committee to leave interest rates unchanged. Stating 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. All of which is helping boost overall consumer spending. The Bank of England said that it expects the unemployment rate to peak at 5.5% later this year. Down from its former 7.75% prediction in February. Their prediction was adjusted due to the extension of the government’s furlough scheme, which finishes in September.
What this means for your mortgage
The strength of the housing market is strongly reflected in the mortgage data, with high levels of borrowing in March. Mortgage borrowing reached an all-time high of £35.6 billion in March, according to Bank of England data. Many homebuyers took advantage of the current low interest rates and the Stamp Duty holiday to keep their costs down.
Homeowners borrowed an additional £11.8 billion, taking net borrowing to its strongest level since the series began in 1993. Those who are not moving, are taking the opportunity to improve their homes, with cheap mortgage rates.
Additional help from the stamp duty holiday that was originally expected to end in March, has significantly influenced potential buyers. The holiday focused borrowers’ minds and helps explain the uplift in lending. Since this has been extended we expect activity to continue to be brisk over coming months. Especially as mortgage rates are likely to remain low and with increased availability of high loan-to-value deals.
Mortgage approvals stood at 82,700 in March. This is up just over 13% on February but lower than the peak of 103,100 recorded in November last year.
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.
Get in contact with our team today to discuss your options and see how we can help you on 01634 968111
