Product category:
Mortgages / Housing
News Release from: John Charcol | Subject: Mortgage
Edited by the Insidemoneytalk Editorial
Team on 06 August 2007
Have we reached the peak in both bank
rate and fixed rates?
John Charcol says that it looks like 5.75% could well be the top of the cycle
Fixed rates begin to creep downward but still look pricey Market Comment "Today's decision by the MPC is the first in many months that will bring cheer to the UK's mortgage borrowers
This article was originally published on Insidemoneytalk on 9 Mar 2007 at 8.00am (UK)
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A simple hold would not normally bring sighs of content around the country, but today's decision may well signify that rates have reached their peak and that the next movement in bank rate will be downward, albeit not until next year," says Ray Boulger of leading independent mortgage adviser, John Charcol.
"Some very encouraging news last month came from the minutes of the last MPC meeting, which highlighted the fact that most of the impact from the previous five bank rate rises has still yet to be felt in the housing market.
This is primarily because many borrowers have been sheltered from rises, safe in the hands of a short term fixed rate deal.
Further reading
Rise of plus size mortgages should mean costs come down
Commenting on the news today that more and more homebuyers are taking out 100 per cent mortgages, Ray Boulger, senior technical manager at independent mortgage broker John Charcol, said:
Ray Boulger comments on the launch of Nationwide's new 25 year fixed rate mortgage
Commenting on the launch of Nationwide's new 25 year fixed rate mortgage, Ray Boulger, Senior Technical Manager at independent mortgage broker John Charcol, said:
As borrowers progressively come to the end of their fixed rates and about 75% are on 2 year deals, the cumulative impact on consumers will increase significantly.
Even without another bank rate rise there is still plenty of pain to come in the property market.
"The other recent helpful news on the interest rate front is the rapidly developing contagion spreading from the sub-prime mortgage problems in the US.
This has made investors increasingly nervous of buying Bonds that are not absolutely top quality.
The resulting so called "flight to quality" has pushed gilt yields sharply lower, and although the spread between gilt yields and swap rates has widened, swap rates have still fallen.
"Whilst predicting interest rate movements is far from an exact science, I would say that the argument for the current 5.75% being the peak is now stronger than the one that calls for more rises." So what should borrowers do now Ray? "We are now beginning to see the first signs of good news for borrowers wanting a fixed rate.
Over the last fortnight, Royal Bank of Scotland, First Active, Coventry and Halifax, have all announced cuts in some of their fixed rates.
Halifax's lowest 2 year fixed rate, excluding expensive ones with huge percentage based fees, has just fallen back below 6% to 5.89% - yet it still looks expensive when compared to the tracker market.
"Even if bank rate does move up another quarter percent, which certainly looks less likely than a month ago, trackers will still offer better value.
The best trackers currently include Halifax and BM solutions, priced at 0.36% under bank rate for 2 years, and Woolwich's lifetime tracker at 0.17% above bank rate." Click on the link at the end of this release to see a table showing how much a monthly payment will be, for both interest-only and a 25 year repayment mortgage For further information, please contact: Ray BoulgerSenior Technical Manager020 7611 7072 / 07977 277431.
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