Interest Rates On Secured Loans Could Keep Falling
There has been an awful lot of speculation over the course of the last few months with regard to what is likely to happen with interest rates in the foreseeable future, with the general consensus of opinion being that they are likely to continue to fall.
We have already seen significant reductions in the monthly cost of a secured loan, as interest rates have fallen from 5.0 per cent in September this year to reach an all time low level of 2.0 per cent in December. For a borrower with a typical homeowner loan of £150,000, on a tracker rate, this means a monthly saving of around £375 in interest payments.
Some experts in the financial markets are now predicting that we could see interest rates in the UK drop as low as zero per cent during next year, as the economy continues to slow down.
Jonathan Loynes of Capital Economics said “There doesn’t seem to be any insurmountable technical obstacles to interest rates falling to zero in the UK.” The Bank of England’s Monetary Policy Committee (MPC) appear to now be quite keen to lower interest rates sooner rather than later, particularly since the rate of inflation is now falling back towards Government target figures, thereby taking pressure away from further cuts in interest rates.
In fact the MPC were actually considering a larger reduction in December than the 1.0 per cent which was finally agreed.
So what does this all mean for borrowers in the UK? For those individuals with a tracker rate on their homeowner loan, or even those paying the lenders standard variable rate, it is likely to mean further savings in their monthly expenditure, although they should check their lender’s small print on minimum rates payable.
New fixed rate mortgages and homeowner loans do not seem to be getting any cheaper and as we have already mentioned in a previous report, personal loans seem to be becoming more expensive due to the higher risks now associated with this type of lending.
