Keeping tabs on the average mortgage rate in the UK may be helpful to those seeking a loan. Not everyone can look at historical mortgage rates or a mortgage rate chart from a lender and figure out if the deal that they're getting is good. Knowing the current average mortgage rates helps home buyers to compare it to the lender's offered 5-year mortgage rates and 20-year mortgage rates. In this article, learn more on the average mortgage rate in the UK.
The quoted average interest rate is one of the rates published by the Bank of England. It is calculated based on the published rates of many financial products by a number of banks and building societies. This is what produces the weighed average quoted household rate.
There's also the effective interest rate for banks. This comes from the monthly banking returns. An annualised rate is calculated based on average daily balances and the interest that they collect. The numbers are broken down based on financial instruments and the sector it is meant for, but the totals cover the bank's entire deposit and lending business. Thus, the weighed average rate calculated covers all of the lender's products.
There are services which help customers to find mortgages that go by base rate tracking. This means that the rates provided for these mortgages will track the base rate provided by the Bank of England or a base rate set by the lender, which in turn follows the Bank of London's base rate. So, for example, ING Direct has a variable mortgage product that follows a rate that is 1.54% above the base rate for a 2-year period. This gives it a current initial interest rate of 2.04%, valid until 2013. What rate the borrower gets after that will depend on the average interest rate published by the Bank of England at the time.
Regardless of the research done or knowledge that the home buyer has about average mortgage rates, it's always a good idea to follow all the latest mortgage rate news. This is important because not all lenders are prompt enough to modify their products or rates when the Bank of London's base rate changes. They're often fast enough to raise rates when the average mortgage rate is hiked. However, if and when the base rate drops, don't expect a lender to drop the mortgage rates immediately.