Low remortgage rates in the UK will soon be a thing of the past, as the economy begins its path to recovery.
The weak economy is postponing any increase in the Bank of England’s standard base interest rate to its normal level. Experts believe that as soon as the economy strengthens, the rate will climb several times, while current remortgage deals will no longer exist.
“Our objective must be to steer the UK economy slowly back to a position of more normal interest rates and lower budget deficits,” said Mervyn King, Governor of the Bank of England.
“With a lower level of sterling and a credible plan to reduce the fiscal deficit over the medium term, we were on track. But the problems in the euro area and the marked slowing in the world economy have lengthened the period over which a return to normality is likely.”
“In contrast to headline inflation, domestically generated inflation remains subdued – and on some measures barely above zero. Increases in energy prices, import prices and VAT account for the current high level of inflation,” he said.
“Once the effects of these temporary factors begin to dissipate, inflation should fall back sharply early next year. A persistent margin of spare capacity in the economy, and the recent deterioration in demand prospects linked to the crisis in financial markets, will add to the downward pressure on inflation in the medium term.”
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