Base Rate Reduction Likely?
The Bank of England (BOE) held the base rate at 4.5% this month, but four of the five members of the Bank of England Monetary Policy Committee voted for a reduction in the base rate according to sources.
So with a reduction possible in the coming months what types of mortgage are now most desirable? Considering a possible downward trend in the base rate a mortgage that follows that trend might be a sensible option. If a potential borrower was for example to choose a base rate tracker mortgage this month, their mortgage repayments would be reduced in accordance with a reduction in the BOE’s base rate, if it were to be reduced later this year. In contrast borrowers choosing a fixed rate mortgage may be disappointed to lose out on the possibility of reduced mortgage repayments as a result of a possible base rate reduction later this year.
In January 2006 only one voter on the Bank of England Monetary Policy Committee voted for a reduction in the base rate of 0.25%. In the subsequent 4 months of votes there was only one vote for a reduction. If four members have voted for an increase in February 2006 it is possible that the vote will sway to a majority in the coming months, according to trends.