Tracker Loan Customers Boosted by Interest Rate Forecast

Mon, 12 Oct 2009

Customers on tracker mortgages could be set to enjoy low home loan repayments for a while to come if a new forecast is to be believed. The Centre for Economic and Business Research (CEBR) has predicted that interest rates will remain low in the UK for years to come. With the government set to cut spending and increase taxes, the CEBR has predicted rates will remain at the record low level of 0.5 per cent until 2011 and not hit the 2 per cent mark until 2014.

Consumers have seen mortgage repayments plummet after the Bank of England cut the base rate from 5 per cent to just 0.5 per cent, and the CEBR expect rates to remain at this level as part of government plans to reduce the budget deficit by £100 billion over the next parliamentary term. £20 billion of this fund will come from tax rises, with the rest from spending cuts.

As the cuts will limit economic growth, the cuts would necessitate a low base rate in order to ensure credit remains affordable and that rates on personal loans do not spiral. The forecast follows last week’s decision by the Bank of England to hold interest rates at the record low level of 0.5 per cent for a seventh consecutive month.
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