It is true that most of the economists in the UK have pushed back their expectation of the Bank of England increasing the standard base interest rate which now sits at a historical low of 0.5%. The rate which has not changed since March 2009 was marked to see its first increase by early 2015, yet some economists believe it could be late into next year or even early 2015.  The reason behind the change in viewpoint is due to a slowing of pay growth, low inflation, a cooler housing market, global economic problems, and low demand from borrowers.  The UK economy is still set to gain strength in the coming year and is on the path of being the strongest economy within the EU.

The UK economy is not the only economy to have an impact on the interest rate level of borrowing. Lenders borrow money on the wholesale banking market for funds to lend. The interest rate they pay impacts the rate borrowers pay. Should the rates rise, then lenders will pay more to borrow or “swap” funds, and the increase will be passed on to borrowers.

There are global economies that are struggling.  Many are slowing down. While the UK has seen strong growth with our economy and has safety nets in place to hold the economy steady as recovery continues, borrowers are not dependent on just the UK economy.  If the overall global economic situation falters then the swap rates will likely increase. Therefore, even if the Bank of England holds their rate steady, lenders may not.

Hopeful home buyers and homeowners seeking a remortgage could find that the current low rates offered in deals will be pulled and replaced swiftly to reflect higher costs of lenders doing business. Attractive rates are available now and while the Bank’s rate could hold steady for a while in 2015 it does not mean that borrowers will find low interest rates being offered by lenders.