Mortgage rates are to stay low for at least a year, according to industry experts.
The Bank of England will attempt to keep mortgage rates low for at least a year in reports from the Evening newspapers yesterday. This article follows our previous report into long term fixed rates and whether it is better to consider short term tracker mortgage deals at present over longer term fixed options.
The last few months have caused borrowers to be rightly anxious about what the future ahead will hold. This has created a stir around longer term fixed mortgages, as interbank borrowing for fixed funds remains steady. John Charcol's Ray Boulger commented in the popular 'Mortgage Strategy' magazine for mortgage professionals that advisers should be "talking to clients about fixed rates now".
My views in a previous article on this site were of the opinion that long term fixed rates are not the answer at present. We published articles in February in favour of fixed rates at a time where they were very low. Now a big gap has developed between Fixed and Tracker mortgages.
The Evening Standard has published more recent comments by leading experts including Howard Archer (chief UK and European economist at forecasters IHS Global Insight) who said that while the recession was showing signs of bottoming out “we could well be in for a very bumpy period for some time to come. Bottom line: interest rates look poised to stay at 0.5 per cent” (Source: This is London / Evening Standard).
Our View:
There are signs of recovery in the property market even though we are at the very early stages; lenders are also starting to loosen their criteria slowly but surely. Fixed rate mortgages are still priced a lot higher than their base rate tracker counterparts - which is why we think that it is shrewd to consider low base rate trackers (with a 1 year tie in at most). Not for the purpose of following any base rate drops, but to ensure you are not paying over the odds for new fixed deals.
Why not just jump onto a standard variable rate I hear you ask? By doing this you would be at the mercy of the lender, who will decide when your rate goes up - Not such a shrewd choice right now.
Our view relates to those prospective new buyers, those already on a variable rate should weigh up their options but are most likely better off staying put due to new deal arrangement fees.
