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Fixed-rate mortgage or variable mortgage?

This week's announcement that the MPC decided to maintain UK base rates at 0.5%, for the 17th month in a row, was not really a surprise for economists in the UK. Indeed many economists believe that UK base rates will remain at the current level until at least the second half of 2011 and possibly beyond if the UK economy does not show signs of growth over the next 12 months. So is now the time to review your mortgage arrangements?

There is no doubt that many people in the UK housing market have benefited from mortgage rates which are linked directly to UK base rates. Even though there has been some fine tuning of the small print with regards to some of these mortgage arrangements, the interest rate charged by many variable mortgage rate providers is minimal compared to historic levels. Whether or not you look to fix your mortgage rate for the foreseeable future or perhaps remain on a variable rate mortgage agreement is open to debate and should be discussed with your financial adviser.

If you believe that UK base rates will rise in the short term then perhaps a fixed-rate mortgage would be sensible, but if you believe that UK base rates will remain at or around 0.5% until at least the latter part of 2011 then perhaps a variable rate mortgage may be the best option?

It is vital that you take professional financial advice from your independent adviser if you're looking to make any changes to your mortgage or investment arrangements.

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