Interest Rates-Fixed or Variable?

interest rates final

Here at Key we are often faced with the crucial financial decision of fixed or variable interest rates for our clients borrowing needs.

There are many pros and cons to take into consideration when making this decision, and of course you need to expect changes to the economic system, which unexpectedly changes the rates. There are some interesting points at present which are;

  • The current record low base rate of 0.5% has been in place for over 7 years.
  • For several years the authorities have continued to move and extend their guidance on how long they expect the rate to continue.
  • In march 2016 it was said that the outlook for rates in the UK had changed ‘significantly’ in the recent months.
  • Inflation is now at its highest level since December 2014, but remains below the Bank of England’s 2% target.
  • The threat of deflation continues, from China whom the world purchase most of its manufactured products are trying to become more competitive by devaluing their currency. This in effect will reduce the cost of products and further decrease inflation.
  • Over the last 2 years negative interest rates have crept in for savers and depositors for nearly a quarter of the global economy. This ultimately means that savers are charged for deposits instead of receiving interest.
  • Swap rates (underlying force for fixed rates) are near record lows. At present the 5 week UK swap rate was 0.92% this means that Banks are selling a 5 year swap rate at below 1.25%, therefore 5 year fixed rates for borrowers are from 3% per annum.

For those clients who want to protect themselves from future rate rises, there are currently some excellent fixed rate offers available. Here at Key we take pride in reviewing the market to ensure that we provide the best options available for borrowers. Please contact us for the best rates available and the wide range of products we have independent access to.