The base rate has been at an all time low of just 0.5 percent for the past ten months, and as such many of the more favourable deals from lenders are the standard variable rate mortgages.

According to reports the popularity of standard variable rate mortgages is continuing to grow, as lenders are offering some very competitive deals as a result of the low base interest rate. John Charcol, the mortgage broker, released figures recently showing that over 80 percent of the mortgages that it arranged in December of last year were variable rate mortgage deals. With many economists predicting that the base rate could remain at this low level for some time to come the popularity of variable rate deals could continue to grow.

The low interest rates on variable mortgages have also affected remortgaging levels, and this is because many of the borrowers that were on special mortgage deals, such as fixed rate mortgage deals, for a period of time are simply allowing their mortgage to revert to the standard variable rate with their lender rather than finding another fixed rate deal or a different deal.

A spokesperson from John Charcol stated: “With the average difference between the fixed rates and the initial rate on the best trackers around 1.5% in favour of trackers, it will currently take a substantial rise in Bank rate for a borrower who takes a tracker to be worse off than one who opts for a fixed rate.”

Continued popularity for variable rate mortgages is a post from: Glitec Loans

The news is not all good, as rates on personal loans are still at five year highs. However, according to reports they have now fallen to their lowest level since the Bank of England cut the base rate to its current low in March of last year.

A number of lenders are said to have cut the rates on their personal loans recently, which will prove good news for anyone that is looking to borrow money. The loan rate cuts have been applied by both mainstream lenders and some other lenders such as supermarket finance sectors, and amongst the lenders that have reduced their personal loan rates so far are Nationwide, Halifax, Sainsbury’s, and Tesco.

Based on Moneysupermarket.com tables the average rate that is now charged on the top ten loan deals is now 8.35 percent on a loan of £7500. This is the second highest rate recorded since 2005, when the average rate was 6.3 percent, with the highest being seen at the start of last year when the average rate was 8.42 percent.

It has also been pointed out that in 2005 the base interest rate was far higher, and this meant that the profit margin for lenders was only slight coming in at around 1.55 percent.

These days, however, with the base rate being so low the profit margin for lenders has soared to around 7.85 percent. Many of these loans are also only made available to those that have the best credit ratings, and those that have blemished on their credit records can expect to pay a significantly higher rate or may find that they cannot quality for a loan at all.

Reductions being seen in personal loan rates is a post from: Glitec Loans

However, the CEBR has stated that the UK could still see house prices increase by between 2 and 4 percent next year. This is not an opinion that is mirrored by all industry groups and officials, as some have predicted that house prices will begin to fall again next year and could continue to do so over the course of the year.

Whilst there are some industry officials and groups that have said that there is a strong likelihood of house price falls over the coming year officials from the CEBR have said that this scenario is unlikely and has cited a number of reasons for this. The centre said that mortgage lending would start to improve on a gradual basis, as financial institutions began to slowly balance their sheets and become more confident and able to lend again.

The group went on to state that the cost of mortgages should also remain fairly low if the Bank of England keeps the base rate at its current all time low of 0.5 percent, as many expect it to do for some time.

This could improve affordability for both existing mortgage holders as well as new borrowers, although the deposit levels and mortgage lending restrictions in place from many lenders could make things more difficult for some buyers.

The biggest victim of the credit crunch, according to the CEBR, was the house building sector, which is said to have seen housing completions fall by around 18 percent in 2008 and expectations that they will fall by around another 19 percent in 2009.

Up To 4 Percent Increase In House Prices Says CEBR is a post from: Glitec Loans

However, since then the base interest rate has plummeted and for the past nine months has stood at its lowest level if the three hundred and fifteen year history of the Bank of England, standing at just 0.5 percent.

As a result of the record low base rate many homeowners have seen their mortgage repayments plummet compared to eighteen months ago and even compared to just twelve months ago. In fact, according to figures that were recently released by the Bank of England around 25 percent of homeowners in the UK are now around £200 a month better off compared to the same period last year as a result of lower mortgage repayments stemming from reduced mortgage interest rates.

The Bank of England started slashing the base rate in the hope of aiding economic recovery, boosting affordability for consumers, and helping the flagging property market to get back on its feet after a particularly difficult period.

Around two thousand homeowners were surveyed as part of the research into mortgage repayments, and around 50 percent of these had seen their mortgage repayments fall by at least £100 a month over the past year and around 25 percent had seen their repayments fall by as much as £200 a month.

Mortgage broker Drew Wotherspoon said that many homeowners would be able to continue benefiting from low interest rates for some time, stating: “The raft of fixed rate reductions being made across the mortgage market this week are undoubtedly going to be a welcome Christmas present for anyone who has been holding out for a fixed rate deal.”

Homeowners better off due to low interest rates is a post from: Glitec Loans

However, despite the encouraging figures the Council of Mortgage Lenders warned that mortgage lending levels for the month were still down by 27 percent compared to the same period last year.

Officials from the CML said that the increase seen for the month of October in terms of mortgage lending levels was typical for the time of year and was down to seasonal activity in the market.

However, it did add that there had been changes in the type of mortgage lending that was now prevalent, with remortgaging hitting the lowest levels in a decade. The CML said that both house prices and lending levels had increased over the summer, and since then had remained relatively stable.

The data was also mirrored by another report that was released by the Bank of England, which was the Trends in Lending Report. This also showed that there was a higher level of mortgage lending activity in October compared to September. Paul Samter, an economist with the CML, said that the figures indicated that the state of the economy in the UK was improving, and that it was likely that the UK was coming out of recession.

However, he also added that improvement in the property market over the coming year was likely to be modest, stating: “We remain sceptical how much further housing and mortgage market activity can improve from current levels. As a result, we also expect only a modest improvement over the course of next year.”

Mortgage lending in October increased compared to previous month is a post from: Glitec Loans

Since mortgage rates plummeted many homeowners have seen their mortgage repayments plunge, leaving them with far more money in their pockets each month.

Many of the borrowers that have benefited from the rock bottom interest rate are those that were tied into two or three year fixed rate mortgages that have recently expired, at which point they have been moved onto the lender’s standard variable rate, which is much lower now than the rate that they were paying on their fixed rate deal. There are still around 42 percent of mortgage holders that are on fixed rates according to the Council of Mortgage Lenders.

The CML also said that mortgages were now at their most affordable since 2004 for those that were able to raise an adequate deposit to get the best rates on mortgage deals. In July of this year borrowers that were taking out mortgages were paying just 12.7 percent of their income towards repayments on the mortgages, whereas in the same period last year they would have been paying 18.1 percent.

The many homeowners that are due to come off fixed rate deals over the next couple of months will most likely allow their mortgage to be switched automatically to the lender’s standard variable rate rather than remortgage, as the SVR is likely to work out much cheaper given the current low base rate.

One hundred thousand homeowners a month benefit from low interest rates is a post from: Glitec Loans

With the base interest rate having fallen to an all time low of 0.5 percent, where is has remained for the past seven months, many homeowners on variable and tracker mortgages have seen their monthly repayments plummet, and this has resulted in them having more money available to put towards other financial commitments.

One recent report has suggested that many of these homeowners who have seen their monthly mortgage repayments fall as a result of the low base rate have been using the extra money to put towards their credit card repayments, thus reducing their credit card debt.

Only one fifth of homeowners with mortgages said that they were using the extra money leftover to maintain higher mortgage repayments and therefore aim to clear their mortgage debt more quickly,

The survey found that around 7 percent of homeowners who had saved money on their monthly repayment due to the lower base rate had decided to use the extra cash to build up money in their current accounts. Around 25 percent said that they were using the extra money that they were saving on mortgage repayments to pay off other debts.

One industry official said: “Tracker and standard variable rate mortgage borrowers have watched interest rates plunge to record lows during this year, presenting an ideal opportunity to pay off their outstanding mortgage more quickly. Such action would enable many thousands of borrowers to take years off their mortgage repayment term, or enjoy a greater level of repayment comfort down the line, should the economy take longer to recover.”

Mortgage repayment savings being used to pay off credit card debt is a post from: Glitec Loans

The central bank has slashed the base rate in the hope that this would help to increase affordability and would ultimately help to revive the property market.

Many industry officials have predicted that the interest rate will remain at this all time low for some time to come, which is good news for cash strapped homeowners.

However, one economist, Simon Ward, has recently warned that interest rates could start to increase early on in 2010, and that the rate increases could be sharper and faster than seen in the past.

He added that inflation was also likely to increase quickly as a result of the quantitative easing programme that the government has put into place.

This brings mixed news for consumers, as whilst homeowners will see their mortgage repayments increase with the base rate rises savers will also see an increase on their returns.

Most economists have already predicted that the base rate will rise once the recession in the UK looks to be over but there is speculation over just how rapid and steep the base rate increases will be.

Mr Ward said that the rate rises would most likely be higher than average, and homeowners with tracker or variable rate mortgages needed to brace themselves for a possible sharp increase in repayments.

Mr Ward said: “An eventual withdrawal of monetary stimulus is likely to take the form of a rise in Bank Rate rather than a reversal of quantitative easing. Given the historically low starting level [of interest rates], rises in Bank Rate, when they begin, could be larger than in the initial stages of prior cycles.”

Economist warns on interest rate increases in 2010 is a post from: Glitec Loans

This marks the sixth month in a row that the base rate has been left on hold, and will come as a relief to many struggling homeowners and industry groups who have been hoping that the base rate will stay at this record low level for as long as possible.

Many industry experts had already predicted that the base rate would remain on hold for this month, and some have gone as far as to say that it is likely that the rate will stay at this record low for the remainder of this year and into next year as the economy makes efforts to recover.

One economist said that if the economy continued to show signs of recovery interest rates hikes could start to come into play in the early part of next year, stating: ‘If the economic data continues to improve, we could see the first interest rate hike in the first quarter of next year.’

Following the latest MPC meeting the Bank of England also announced that there was to be no further extension on the quantitative easing program, with the government having already exceeded the £150 billion limit by ploughing £175 billion into the economy through this process so far.

Last month there was a surprise £50 billion extra announced following the MPC meeting, with rumours that the governor of the central bank had been calling for even more than this amount.

One official said that the central bank may look at the quantitative easing scheme again later in the year, stating: ‘Having extended the programme only last month it would have been very surprising if they’d felt the need to extend again this month. I expect they’re on hold until November. Our guess is that they may extend again in November.’

No change to interest rates for September is a post from: Glitec Loans

Over the past six weeks or so it is claimed that some lenders have increased the average rate of interest charged on their personal loans by 1 percent, despite the fact that the base interest rate is still at its lowest level ever at just 0.5 percent.

One price comparison website claims that the average personal loan rate now stands at 9.07 percent, which is an increase from 8.74 percent a year ago, when the base interest rate was ten times higher than it is now.

One industry official said: ‘Hiking loan rates in the current climate is just making an already difficult situation practically impossible for consumers. Much as we understand that the banks are struggling, these are big hikes to swallow. With all eyes on mortgages and savings, it seems loan providers are slipping under the radar slightly.’

Around one and a half million consumers are said to have opted for a personal loan last year to consolidate other debts in a bid to reduce monthly outgoing. However, with loan rates rising like this many may find that this is no longer an affordable or viable option, leaving them to look at other solutions to reduce their debt repayments.

One consumer stated: “I recently looked at taking out a personal loan, and was shocked at the interest rates being charged. With the base rate so low I thought that personal loan interest rates would have also fallen, but this simply isn’t the case – quite the contrary in fact, with most of them having increased.”

Banks increase profits through increasing loan rates is a post from: Glitec Loans