Liquid error: wrong number of arguments (2 for 1) MSN UK: Low interest rates 'aid home deals' | Marsh & Parsons Sales and Lettings Estate Agents London

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MSN UK: Low interest rates 'aid home deals'

Tue 06 Aug 2013

Savers will pay the price for historic low interest rates, experts have said. The housing market revival will be boosted further by confirmation that historic low interest rates are here to stay, but savers will pay the price by suffering years more misery - experts have said. Lower-for-longer interest rates could result in already ultra-low mortgage deals being made even more attractive, according to analysts.

But desperate savers were warned that they may need to consider taking on more risk if they want to make decent returns on their cash. Peter Rollings, chief executive of estate agent Marsh & Parsons, said the indication that rates will stay at historic lows for at least another three years will give another "significant boost" to the housing market, which has already been gathering pace as confidence in recent months following various Government schemes.

Lenders have been offering some of their lowest ever mortgage rates since the Government launched a scheme one year ago called Funding for Lending, which gives lenders access to cheap finance. Another scheme called Help to Buy which will be fully launched next year is set to offer an extra helping hand to mortgage borrowers with smaller deposits in particular. Mr Rollings said: "This is a highly important statement which will allow lenders to offer attractive fixed rate deals to potential buyers and will surely lead to greater demand and activity in both the resale market and provide a fillip for first-time buyers."

Jonathan Harris, director of mortgage broker Anderson Harris, said: "This is far more certainty than we have ever had and while it brings no comfort to savers, it will reassure overstretched borrowers who are worried about potential rate rises. 'We expect fixed-rate mortgages to fall even further on the back of this announcement. They may already be at historic lows but if lenders are to convince borrowers to opt for a fix when interest rates are highly unlikely to rise, then pricing needs to be attractive."

Mr Harris said that mortgage borrowers looking for certainty beyond the next three years should consider taking out a five-year fixed-rate deal. Forward guidance aims to provide reassurance and to boost consumer and business confidence - seen as a vital tool in helping to cement the UK's economic recovery. It is expected to help spur on spending as borrowers are spared the threat of interest rate hikes after more than four years at the record low of 0.5%.

Matthew Whittaker, senior economist at the Resolution Foundation, said around 600,000 families are "highly sensitive" to future borrowing costs as they currently spend more than half their net income on repaying their debts.

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